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Outgoing Corporate Executive Gets $210 Million

In English, a "golden parachute" is a term that describes very generous compensation paid to a corporate executive who is retiring or being removed for poor performance. This kind of parachute was deployed this week by the chief executive of a large American home supply store. His $210 million severance package guarantees him a soft landing among the unemployed. But as VOA's Peter Fedynsky reports, it has also raised questions about fairness.

Robert Nardelli was hired in the year 2000 to run Home Depot, a multi-billion dollar corporation that sells hardware, lumber and other home improvement supplies. During his tenure, Nardelli accumulated a personal fortune of $150 million. He is getting $210 million in cash, stocks and other benefits for leaving.

New York Times business columnist Joe Nocera says the separation package was part of Nardelli's contract. "The company was floundering six years ago. They needed a makeover. They wanted a high profile, high energy superstar."

Home Depot doubled profits during Nardelli's tenure. But the corporation's stock fell seven percent while that of a competitor rose 185 percent. Columnist Joe Nocera says resentment erupted at the company's annual board meeting.

"I have to tell you this was one of the most dictatorial annual meetings I've ever seen in my life. There were timers; no one could speak for more than a minute. He refused to answer any questions, there were no board members there."

The exorbitant severance packages, known as "golden parachutes," are increasingly common in the corporate world. Last year, Hank McKinnel, left the top job at Pfizer after the pharmaceutical company's stock dropped 41 percent, his compensation - $200 million. Stephen Crawford, got $32 million after a mere 106 days as co-president of the Morgan Stanley investment bank. And Lee Raymond, chairman of the Exxon Oil Corporation, got a retirement package worth nearly $400 million.

Lawrence Mishel, President of the Economic Policy Institute, a Washington, D.C. think tank, accuses America's corporate elites of using their privileged status to run what he calls a klepto-economy - an economy of thieves. "A head of a company now, a major company, earns over 260 times that of a regular worker. Back around 20 years ago it was just about 35 times, back 40 years it was 25 times. I don't think we need to pay people that much to get them out of bed in the morning to go to work."

Executive compensation is determined by a company's board of directors. They often defend golden parachutes as necessary to compete with other companies for the country's most talented managers. But Lawrence Mishel notes that executive profits ultimately come out of the pockets of shareholders, workers, and consumers.