Byline: Don Baker Post staff reporter
When W. August 'Gus'' Hillenbrand retired as CEO of Hillenbrand Co. two years ago, he left behind his annual salary of $909,508. But the 62-year-old signed a consulting contract with the company that promised to pay him $907,000 annually for five years.
The Batesville, Ind.-based funeral services company also agreed to let Hillenbrand use the corporate jet for his personal travel and to provide company personnel to handle payroll and tax filings for his household staff.
The retired CEO also received a life insurance policy for him and his spouse, company-paid health insurance and payment of non-covered medical expenses, an automobile and related expenses, an office with a secretary and all office furniture and equipment. Hillenbrand's retirement package is the most lucrative of the area CEOs that have retired in recent years.
After they leave the corner office, CEOs often are showered with many of the same perks they enjoyed while leading their companies, which sometimes produces extravagant severance agreements. The most notorious case is the package given to General Electric Co.'s former CEO Jack Welch - whose deal included the company paying for a Manhattan apartment, satellite TV in four homes, personal chef, food and wine, use of the corporate jet, a car and sports tickets, and an annual consulting fee of $86,000.
'It's outrageous what is happening,' said Dan Radford, executive secretary-treasurer of the Cincinnati AFL-CIO Labor Council. 'It's just not right.'
The Hillenbrand company took an $8 million charge for the retirement package offered to Gus Hillenbrand, according to the company. That amounts to 13 cents per share based on the 61.9 million shares outstanding as of August. That retirement deal came within a year of the company cutting 400 jobs from its health care division.
'I think an executive, when they retire, should get certain benefits just like anyone else,' Radford said. 'But what's happening in this country and here in Cincinnati, while they're laying off workers and downsizing, is morally wrong.'
The Hillenbrand company revealed the perks in a recent filing with the U.S. Securities and Exchange Commission, in which it said its board said it is re-examining the practices.
Chris Feeney, Hillenbrand spokesman, said Gus Hillenbrand's contract was based on his 'level of institutional knowledge as well as industry knowledge that is unavailable anywhere else in the world. That knowledge he has of the industry and our business is of value to Hillenbrand shareholders.''
The perks offered to retired CEOs differ for each business, but the practice of offering fringe benefits to retired company executives is coming under scrutiny. The U.S. Securities and Exchange Commission is investigating some cushy retirement contracts and calling for more openness in all severance deals.
But you don't have to be the former head of the world's largest company to get a handsome retirement package. A look by The Post at what Greater Cincinnati public companies have offered to retired executives in recent years reveals perks that range from the usual to extravagant.
Among the more common perks in retirement packages for top executives are use of company office space, company car, payment of club dues and financial planning or tax assistance services.
Procter & Gamble Co. is the largest local company, but it offers a smaller severance package than other area companies.
Former Chairman and CEO John Pepper is allowed use of office space and support staff in P&G's headquarters, and has a lifetime retainer of up to $65,000 annually for being available to consult with current executives. A P&G spokeswoman said when Pepper retired this summer, he was offered the same medical benefits as the average employee receives upon retirement.
P&G, with $40 billion in sales, does not offer a company car, personal loans, payment of club dues or free use of the corporate jet - all perks offered to retired executives from smaller companies.
'It's our belief that we want to do what's fair and right, and what makes prudent use of our company resources,' said P&G's Jeannie Tharrington.
When former CEO Durk Jager resigned from P&G in 2000 after 18 months at the helm, he was paid a lump sum of $9.5 million in severance, and was cut a check for $3.7 million from a supplemental pension plan. Jager wasn't offered any other perks.
Part of the $9.5 million severance was considered payment for consulting services through June 2003. Tharrington said Jager has been called for advice by current executives, but she didn't know how many times.
E.W. Scripps Co., parent company of The Post, offered current Chairman William Burleigh severance benefits when he retired as CEO. The perks for Burleigh include paying for business-related memberships in clubs and organizations while still a director, financial planning and tax services while a director and use of office and secretarial services until age 70.
Chiquita Brands International Inc. awarded a severance payment of $4 million to Steven Warshaw when he resigned as CEO in March, but didn't offer any other perks because he didn't retire. A Chiquita spokesman said current CEO Cyrus Freidheim does not have a severance agreement.
For Cinergy Corp., offering severance contracts was a way to reward executives for the benefits of the merger that created the utility company, as well as helping attract talented executives.
'We maintain efforts to stay competitive with other businesses in the region and our industry,' said Steve Brash, Cinergy spokesman
Cinergy retirement packages for two former officials include payment of club dues, financial planning and tax services. Also, Jackson Randolph, former chairman of Cinergy, was given his company car - a 1999 Jaguar - when he retired in 2001.
Larry Thomas, former executive vice president of Cinergy and vice chairman of its Indiana-based PSI subsidiary, was given a consulting contract, a car allowance of $50,000 and a $2,000 computer allowance. Thomas' fee for the three-year consulting contract was built into his $3 million severance payment.
Highland Heights, Ky.-based General Cable Corp. paid a lump sum severance of more than $8.2 million to Stephen Rabinowitz when he retired last year as chairman and CEO. The company said in SEC reports that it also offers health and insurance benefits for three years and use of a company automobile.
Cincinnati-based Provident Financial Group Inc. paid former CEO Allen Davis $500,000 in 1998 under a consulting contract related to his retirement agreement that year. The company didn't return a call seeking the full details of the severance agreement.
Milacron Inc., whose former Chairman and CEO Daniel Meyer retired in 2001, offers some of the standard items such as use of company car, financial planning and tax services for three years, membership in local business clubs for five years, as well as off-site office space and continuation of loans for one year
Paul Fiorelli, director of Xavier University's Center for Business Ethics and Social Responsibility, said as long as company shareholders agree the executive deserves the retirement packages, then they are warranted. The real problem comes when companies don't reveal complete details of the deals publicly, he said.
'The board owes a fiduciary duty to the shareholders,' Fiorelli said. 'The first part of that duty would be to disclose the size of the packages; the second part would be to make sure that package is appropriate.'
One problem that needs to be addressed is the 'coziness' among directors, Fiorelli said.
'It just doesn't seem that you have a lot of watchdog oversight of (boards of directors),' he said.
Radford said now is the time for more openness.
'I think it's long overdue that those closet decisions made in the back of the board rooms become a thing of the past,' he said.
Brash said Cinergy makes an effort to reveal details of severance deals in its SEC reports, and to 'let our shareholders know what we're doing.'
The public spotlight might not shine on the issue of cushy retirement packages when the stock market rebounds.
'When the market is flat and stocks are losing value, they're going to ask more questions,' Fiorelli said. 'If the stock is going up, the shareholders aren't going to worry about the CEO making a lot of money.'
John Pepper, Procter & Gamble
Lifetime retainer of $60,000 to $65,000 per year for consultation services.
Use of office space and support staff in P&G headquarters.
Medical benefits same as all other retired employees.
Stephen Rabinowitz, General Cable
Lump sum payment of $8.3 million under 'termination of employment' section of contract.
Health and insurance benefits for three years.
Use of company automobile.
Durk Jager, Procter & Gamble
Retired abruptly in July 2000; given a lump sum payment of $9.5 million, partly based on his availability to provide consulting services to the company through June 2003.
Supplemental pension payout of $3,743,448.
Daniel Meyer, Milacron, Inc.
Off-site office.
Membership in business club for up to five years.
Use of company car while still a director.
Financial planning and tax assistance for three years.
Continuation of outstanding loans for one year under Employee Stock Loan Program.
William R. Burleigh, E.W. Scripps Co.
Business-related memberships in local clubs and organizations as long as still a member of board of directors.
Financial planning and tax preparation as long as still a director.
Use of office and secretarial services until age 70.
Allen Davis, Provident Financial Group, Inc.
Davis retired from Provident in 1998 at age 56. His retirement agreement included a payment of $500,000 that year under a consulting contract. Full details of the severance agreement were not available.
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