Business - New York Big pay for CEOs turning consultants Consulting gigs come with no strings attached, no performance goals to meet

By Rachel Beck AP Business Writer NEW YORK (AP) -- Tough job market? Not for corporate honchos who snag cushy consulting deals at their former companies for $3,000 an hour. That's what General Motors is paying Fritz Henderson -- the same guy the struggling automaker ousted three months ago because he wasn't doing a good enough job turning around GM. The rap on him: He was too tied to GM's hidebound ways to fix GM quickly. Now he's back, and getting paid $59,090 a month for 20 hours of work. So it goes in corporate America these days. Costs are being slashed all around -- plants shuttered, workers fired, wages for the rank-and-file frozen -- unless you belong to the elite fraternity of the Former CEO. Others companies, such as Regions Financial Corp. and Pulte Homes Inc., have also disclosed they'll be paying big money to former executives for little work. Consulting gigs have been a way of rewarding departing executives for years. It would be as if the Indianapolis Colts kept Peyton Manning on after he retires to give a few high-fives to his former teammates -- while collecting a hefty paycheck. Companies say consulting contracts allow them to tap their former leaders' experience, knowledge, credibility and more. Customers, clients and shareholders know them. That's good for business, according to companies. These gigs also keep departing executives from working for a competitor, which some say is the main reason why they are done. Keep the former executives on the payroll with a generous salary, and then they're OK with the noncompete clauses in their contracts. "These arrangements make sure the executives don't walk across the street to work for someone else," says Nora McCord of the compensation consulting firm Steven Hall & Partners. But these gigs also are another perk reserved for the top brass. That's the thing with these consulting deals -- there aren't many strings attached. No performance goals to meet or shareholders to answer to. "These positions get to fly under the radar," says Eleanor Bloxham, who runs Corporate Governance Alliance, a board advisory firm in Westerville, Ohio. "No one outside of the board really knows how the consultants have to spend their time." GM spokesman Noreen Pratscher says Henderson is earning the market rate for someone with his expertise. He will be consulting exclusively on the automaker's business overseas, where he has extensive experience. Henderson will help Tim Lee, who was appointed in December to lead GM's international operations out of Shanghai, Pratscher said. It sounds like a lot to tackle during his 20 hours of working time a month; actually, it's probably what Henderson put in each day when he was leading GM last year. He was tapped by the Obama administration to run GM last March after former CEO Rick Wagoner was forced out. He led GM through a record-fast bankruptcy, but his tenure was marred by failed deals and weak sales. On Dec. 1, GM made the surprise announcement that Henderson would retire. Henderson will work for GM on a month-to-month basis through Dec. 31, though the agreement at any time can be terminated by the company or him. If he stays the year, his pay from February through December would be about $551,000, or about 60 percent of his 2009 salary of $950,000. Henderson also received shares worth $4.2 million last year, to be exercised when GM becomes a public company again. "I guess they are assuming the North American bile that poured down on his head over the last few months didn't reach the attention of anyone overseas," says Gerald Meyers, a professor of management at the University of Michigan and former auto industry executive. Regions Financial Corp.'s outgoing CEO C. Dowd Ritter will get a five-year consulting contract at the Birmingham, Ala.-based bank after he steps down in March. He has been at the helm of Regions since November 2006, when it bought AmSouth where he was CEO for a decade. Regions lost $1.1 billion in 2009 on top of a $5.6 billion hit the year before. The bank is still struggling due to its real-estate exposure in hard-hit Florida and other markets in the South. Regions has yet to pay back the $3.5 billion it received from the taxpayer-funded Troubled Asset Relief Program. Ritter's 2009 salary hasn't been disclosed yet, but in previous years it was $995,000. He can't access his stock compensation that was granted in 2009 until the TARP funds are repaid. As a consultant, he will earn $475,000 for 75 hours of work in the first year, which starts in April. After that, his fee drops to $400,000 and then will be reduced annually by $100,000 until 2015, according to a securities filing on Monday. After 40 years at the company, Ritter has strong business relationships, and his consulting work "will help ensure those constituents remain satisfied with Regions through the transition," Regions spokesman Tim Deighton says. Pulte Homes Inc. has lost $5 billion since 2007, but the homebuilder's board still is keeping founder and chairman William Pulte on as a consultant when he steps down from the company March 31. "Mr. Pulte has six decades of experience with the company he founded in 1950, and his knowledge and expertise in the homebuilding industry is extremely valuable," says Pulte spokeswoman Caryn Klebba. The 77-year-old Pulte will earn $1.5 million a year over the next two years to consult for 300 hours annually, according to a Feb. 16 securities filing. That's $5,000 an hour for someone who already owns 41 million shares, or nearly 11 percent, of the company's outstanding stock. ---------- Rachel Beck is the national business columnist for The Associated Press. Write to her at rbeck@ap.org Published: Wed, Mar 3, 2010

––––––––––––––––––––
 Subscribe to the Legal News!
 https://test.legalnews.com/Home/Subscription
Full access to public notices, articles, columns, archives, statistics, calendar and more
Day Pass Only $4.95!
One-County $80/year
Three-County & Full Pass also available