By Meg Richards
The Associated Press
NEW YORK - When the new chief executive of Kmart takes the company's jet for personal trips, he will have to pay for it. His base salary is lower than that of the company's former CEOs, and he got no signing bonus.
Kmart's board of directors, criticized for not doing enough to prevent the century-old retailer from going bankrupt, showed evident restraint last month in the terms offered to Julian C. Day, its third CEO in less than a year.
These are the corporations that made the largest U.S. bankruptcy court filings of 2002 and their chief executives.|
WorldCom Inc., filed July 21; total assets previously declared at $103.9 billion
Current CEO: Michael Capellas, named in November
Compensation: A three-year, $20 million package approved in December.
Conseco Inc., Dec. 17; total assets $61.4 billion
Current CEO: William Shea, named in November
Compensation: not yet disclosed.
Global Crossing Ltd., Jan. 28; total assets $25.5 billion
Current CEO: John J. Legere, named in October 2001
Compensation: Prior to bankruptcy, $1.1 million annual salary, a signing bonus of $3.5 million and the company forgave $10 million in loans he received as head of Asia Global Crossing. His annual pay was cut 30 percent after the bankruptcy, but the rest of his compensation remained in place, including a quarterly $800,000 bonus for staying on, and a possible annual bonus not to exceed $1.37 million.
UAL Corp., Dec. 9; total assets $25.2 billion
Current CEO: Glenn F. Tilton named in September
Compensation: Annual salary of $950,000, a $3 million signing bonus, stock options, relocation and other expenses.
Adelphia, June 25; total assets $24.4 billion
Current CEO: William Schleyer, brought in with new COO Ron Cooper, named in January
Compensation: Under a three-year deal that still must be approved in bankruptcy court, the pair is guaranteed $23.9 million and is likely to get at least $41 million.
Kmart Corp. Jan. 22; total assets $17.0 billion
Current CEO: Julian C. Day, named in January
Compensation: $1 million salary, plus a $1 million bonus promised when the company emerges from bankruptcy, with possible additional cash bonuses.
Source: BankruptcyData.com, company disclosures.
As troubled companies turn over CEOs, not every new one is getting hired on bargain terms, and some experts question whether that is a good approach. But the lavish treatment of top executives is being scrutinized and often reconsidered after last year's string of scandals and bankruptcies.
Day, who held senior positions at Sears and Safeway Inc. before joining Kmart, will earn an annual salary of $1 million. He's guaranteed another $1 million when Kmart emerges from bankruptcy.
In contrast, former CEO Charles Conaway - whose management is now the subject of an internal inquiry - received more than $20 million in loans, cash, shares and bonuses in his first year, and he negotiated the right to fly anywhere he wanted in the company jet.
James Adamson, who succeeded Conaway as CEO, was granted a $2.5 million signing bonus, and will be paid $3.6 million after Kmart emerges from bankruptcy - which the company hopes to do by April 30.
Conaway's package may not have been considered extravagant at the time, but many would find it outrageous in today's climate. At least five of last year's bankruptcies - WorldCom, Conseco, Global Crossing, UAL and Adelphia - rank among the 10 largest in U.S. history.
Not everyone agrees that cutting back on executive compensation is advisable when companies need a leader with skill, experience and credibility. A chief who can guide a company through the bankruptcy jungle, experts say, is probably worth every cent they make.
After WorldCom filed for Chapter 11 last July, striding past Enron to become the largest bankruptcy in U.S. history, Michael Capellas was named CEO. When the corporate board proposed he be paid $25 million over three years, court-appointed monitor and former SEC Chairman Richard Breeden objected, and a bankruptcy judge knocked it down to $20 million.
While it may take years to unravel the accounting scandals and strategic missteps that led to WorldCom's fall, Capellas - who led Compaq Computer Corp. through a restructuring and merger with Hewlett-Packard Co. - has expressed hope it could emerge from bankruptcy in the spring.
"In a world where football players are making $15 to $20 million, I'm not at all troubled that a guy like Capellas is making $20 million over three years to save one of the largest telecom companies in America," said Harlan Platt, a finance professor at Northeastern University's College of Business Administration.
"On the other hand, there are a lot of corporate executives who are making millions of dollars, and they don't deserve it," Platt said.
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