Let me see if I have this straight. E-Trade Financial fires CEO Steven Freiberg two years into his four-year contact after it becomes eminently clear that he’s not the man to fix the company’s seemingly endless mortgage problems, and Freiberg walks away with a $7 million severance payment? For what? Thanks for a job well done? Not if you take a look at E-Trade’s recent earnings history or stock chart. The company’s performance has been a disaster, and the job Freiberg did when he was CEO is presumably a key reason why. For this, he gets a fat severance. Crazy.
This habit corporate America has developed of giving fond-farewell packages to even its most incompetent CEOs is outrageous. As it is, Freiberg received $3 million in stock awards and $630,769 in salary for the job he did (badly) in 2012, along with a pro-rated bonus of $1.2 million and accelerated vesting of stock awards. Haven’t shareholders been soaked enough? What in the world is the extra $7 million for? E-Trade might argue that the dollar amount is immaterial, and that the deal (although I have no idea of its details) provides, say, a prohibition on any lawsuits by Freiberg, along with a promise of non-disparagement. I don’t buy that. If E-Trade is so afraid of what its former CEO might say about it in public, governance there is even sorrier than the company’s recent history suggests. And $7 million is a lot to pay to avoid litigation by a single disgruntled ex-employee.
Financials services companies have taken a lot of undeserved hits over the past few years. Given that, I’m amazed that there isn’t more outrage whenever a company, in financial services or not, makes one of these idiotic payouts to a failed executive. Dismiss it as an immaterial dollar amount if you want, automatic severance is simply an instance executive-suite pocket-lining-and with other people’s money, at that! As shady corporate practices go, this has to be among the worst.
What do you think? Let me know!