|  | | 2004 News and Press Releases | | |
HEADLINE NEWS:
SHAREHOLDERS BEGIN TO FIGHT RICH PAYOUTS TO EXITING EXECUTIVES
Staff Writer
Chicago Tribune. December 29, 2004
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EXCERPT: A day after Fannie Mae reported the lucrative pay and benefits it plans to bestow on its outgoing senior executives, critics blasted the company for providing such a cushy landing to officials accused of profiting from flawed accounting. Franklin Raines, forced out last week as Fannie Mae's chairman and chief executive after five years, is slated to receive more than $19 million in cash and stock plus a lifetime monthly pension of about $114,000, according to an agreement with the mortgage lending giant. That massive payout provides fresh ammunition to investors and corporate governance experts who deride some of the severance deals as pay-for-failure packages. They argue that corporate executives don't deserve extra inducements for resigning under pressure or simply leaving. Yet recent headlines from business icons such as Walt Disney and General Electric show that boards of directors continue to support lavish farewells for the senior managers they oversee. "The severance payments are just outrageous," said Elliot Schwartz, director of research at the Council of Institutional Investors, a corporate governance group made up of pension funds. "Once the guy is leaving, you don't need to give them incentives any more." Despite mounting criticism, companies continue to dole out large exit packages because they are essential for recruiting top executive talent, compensation experts say. "There has to be a fairly generous severance package because that's just what the market is today," said Mark Weisberg, a Chicago attorney who specializes in executive compensation. But shareholders are fighting back. An unfolding courtroom battle involving Disney is being held up as a cautionary tale for directors and executives. |
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