Tuesday, November 13, 2007

Happy Hour

Many baby boomers, recent research has revealed, have no intention of retiring. The idea that they might quit working strikes terror into their hearts, and the idea that they'll never leave strikes terror into everyone else’s.

But a recent post here noted that companies in Proxyland – including, of late, Merrill Lynch (MER) – like to ease out failed CEOs with this happy message: “You’re not fired, you’ve retired!” After that, Reuters made the same point in a story entitled: “Firings Are Few and Far Between in Executive Suite.” The piece, by Martha Graybow, explained that boards have an incentive to work out so-called "friendly divorces" (now there’s a whopper of an oxymoron) because of juicy contracts assuring CEOs huge payments if they’re fired. (Unless, of course, they're ousted for “cause” - but as regular visitors to this blog know, merely doing a crummy job in an exalted and highly-paid position doesn't usually get you there.)

Having obligingly locked themselves into rich severance promises, boards can say shareholders come out ahead when a poorly performing CEO is allowed to retire. Mr. O’Neal, though, had no employment contract, so it’s not clear how Merrill shareholders benefited from this face-saving measure; an old-fashioned firing would at least have given them some emotional satisfaction in exchange for forking over $161 million in equity and vested retirement (plus some nice perks) to a very well-paid guy who presided over an $8.4 billion loss. (Mr. O’Neal’s “non-severance” deal, as Broc Romanek points out here courtesy of The Corporate Library, is “#5 on a list of 10 of the most excessive severance packages this decade.”)

So at least one baby boomer has retired early. With his company-paid car and driver, Mr. O'Neal can easily cruise Manhattan's restaurants for early-bird specials.