Wednesday, January 4, 2012

Whoa! This CEO took $750M out of his company

John Hammergren has taken $750 million out of McKesson, Inc., in the 13 years he's served as chairman and chief executive of the company.

By most accounts, Hammergren's been a pretty good, B-B-plus kind of CEO. He righted the company after an accounting fraud scandal, but he blew a lot of money on health technology and a surgical supply business that never took off. And there was a teensy little price-manipulation scandal ($442 million settlement) during his tenure.

One former accounting professor says his $750 million paycheck is basically theft. We tend to agree. And it's theft from you if you happen to own stock in an S&P 500 fund. (Check to see what your 401(k) is invested in.) The reason is that Hammergren has taken much of his compensation in the form of stock options. Reports The Daily Beast:
“As far as I’m concerned, a board that keeps loading up its chief executive with more stock and options each year is, from a shareholder perspective, basically committing theft,” says Albert Meyer, a former accounting professor who runs a money-management firm called Bastiat Capital....Options aren’t free; they dilute the worth of everyone’s shares. And the practice hurts more than the privileged few. Anyone who owns an index fund of the country’s 500 largest companies owns shares in McKesson, a Fortune 500 company. “It’s nothing short of a massive wealth transfer from the retirement accounts of middle-class Americans to a privileged few,” hidden in the guise of stock-option programs like McKesson’s, Meyer argues.
You'd think these CEOs would have some shame and take a little bit of a pay cut at a time when ordinary people's wages are falling.  You would be wrong. According to the Huffington Post, CEO pay rose between 27 percent and 40 percent last year. Terrorist supporter JPMorgan Chase CEO Jamie Dimon got a $19 million raise last year, and perjurer Goldman Sachs CEO Lloyd Blankfein got an extra $3.6 million.

Kind of turns your stomach.