Getting paid to go away

Robert Laing introduces the boys who made a mint out of quitting

Getting fired can produce a particularly bountiful payday for a CEO, Warren Buffett lamented in his 2005 letter to Berkshire Hathaway shareholders.

"Indeed, he can 'earn' more in that single day, while cleaning out his desk, than an American worker earns in a lifetime of cleaning toilets. Forget the old maxim about nothing succeeding like success: today, in the executive suite, the all-too-prevalent rule is that nothing succeeds like failure," Buffett said.

Not surprising, then, that six SA Airways executives made this year's top earners' list, thanks to the generous severance packages implemented under Khaya Ngqula before he was sacked as CEO in March last year. Ngqula's R9.35-million golden handshake was the list's fourth-highest exit package.

SAA commercial unit manager Rushj Lehutso, who was suspended for misconduct in February 2008, received R1.5-million. The other four former executives of the national carrier got more modest golden handshakes, ranging from R68000 to R289000.

Super Group's Larry Lipschitz was reportedly dissatisfied with his R6.4-million severance package. The company's new management team, which had to salvage Super Group via a rights issue, told Business Times last year that its former CEO was disputing the settlement it offered him. Former chief finance officer Dheven Dharmalingam got a R3-million golden handshake.

Some CEOs do manage to get their sky-high final balloon pay-cheques amicably. For instance, this year's top earner, Pine Pienaar, received his R34.4-million final pay-cheque from Mvelaphanda Resources by making his job redundant.

Pienaar oversaw the distribution of the passive holding company's underlying investments in Northam Platinum and Gold Fields to its shareholders.

He now heads junior platinum miner Bauba, which reverse listed onto the JSE via Absolute Holdings in September.

The second-highest severance package on the list also went to a CEO of a major mining group, who departed to develop a junior mining group.

Brad Mills pocketed R19.5-million after resigning as CEO of Lonmin shortly before Xstrata launched a hostile takeover bid. Mills appears to have left voluntarily. But according to some reports, Lonmin's directors replaced Mills with Ian Farmer because they felt he was not repulsing Xstrata's advances aggressively enough. Farmer succeeded in persuading shareholders to reject Xstrata's $10-billion bid.

Mills now heads Toronto-listed Mandalay Resources, which owns exploration tenements and a small Australian antimony and gold mine.

The third-biggest termination package went to Nampak's John Bortolan, who received R9.9-million on retiring at the end of March last year.

Tokyo Sexwale's decision to leave Mvelaphanda Group to take up the cabinet position of human settlements minister gained him a R4.9-million exit package.

The golden handshakes for Telkom's former CEO Reuben September and chief financial officer Peter Nelson have not been reported yet, making them strong contenders to head next year's termination package rankings.

Wage slaves will be wondering how CEOs manage to secure these stratospheric termination fees, especially those that get booted out (though the formal statement invariably says they resigned or retired) after losing their shareholders a fortune.

Buffett sheds some light: "Huge severance payments, lavish perks and outsized payments for ho-hum performance often occur because compensation committees have become slaves to comparative data. The drill is simple: three or so directors - not chosen by chance - are bombarded for a few hours before a board meeting with pay statistics that perpetually ratchet upwards. Additionally, the committee is told about new perks that other managers are receiving. In this manner, outlandish 'goodies' are showered upon CEOs simply because of a corporate version of the argument we all used when children: 'But, Mom, all the other kids have one.' When comp committees follow this 'logic', yesterday's most egregious excess becomes today's baseline."