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Verizon’s $18.5 Million Goodbye to Ex-President

by on February 26, 2010

This article is unbelievable.

I knew about awarding incentives to employees to retain them in a company but had no clue about signing executive bonds worth millions of dollars even after retirement of senior company employees. First of all, no doubt that their base salaries are eye-popping and over that a separation payment of almost 14 times base salary is mind-boggling.

From the article:

In the preliminary proxy that Verizon filed on Tuesday, it disclosed that Dennis F. Strigl, the company’s former president and chief operating officer, would receive an $18.5 million separation payment this coming July. Mr Strigl, a longtime telecommunications executive who had also served as president and chief executive of Verizon Wireless,announced his plans to retire in early September. His last day at Verizon was Dec. 31.

Given that Mr. Strigl’s base salary was $1.32 million last year, the $18.5 million payment represents a hefty multiple of 14 times the executive’s base salary. In its filing with the Securities and exchange Commission, Verizon describes this as required under Mr. Strigl’s employment agreement.

There are other goodies thrown in as well for Mr. Strigl, including a $1.9 million short-term plan award, a $451,000 executive life insurance benefit, and a tax gross-up worth $367,478. Mr. Strigl will also have his telecommunications services covered for the next five years, which the company estimates will cost around $11,500.

Of course, Verizon is no stranger to hefty executive send-offs for retiring executives. In the same filing, the company noted that Doreen A. Toben, who stepped down as chief financial officer last March and left the company in June, received $3.5 million under her employment agreement and also entered into a one-year consulting agreement that paid her $125,000 each month. And at the end of 2008, when William P. Barr retired as Verizon’s general counsel, he received a payment of $10.38 million six months after he stepped down from the company.

-Deepti Shah

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One Comment
  1. Yes, these are mostly part of compensation packages and severance pays that are provided to executives. In my first emerging issue paper- “CEO Compensations: Managerial Issues in Remuneration”, I drew light to some of the most obscene bonuses awarded to CEOs. For example, Alan Fishman who controlled Washington Mutual (WAMU) for just 17 days before it failed. Fishman received around $19 million dollars in severance pay and signed bonuses.

    The problem is finding a method of measuring the executive’s performance. It is very difficult to implement pay-per-performance mechanism for executives.
    Another example would be of Jeffrey R. Immelt, who held 8 years as chief executive officer of General Electric. He had a -12% annualized total return during his tenure, but took along a six-year average annual compensation of $14.4 million. But again, it is Jeffery Immelt’s modern concept of reverse innovation, which brought in a new breakthrough in managerial practices.
    The question still remains,how do we know if executives are being rewarded appropriately?

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