Sam Palmisano was an excellent CEO for IBM. During his decade or so in charge of the company, he successfully transitioned it away from hardware into a services and software powerhouse.
Still, details in IBM’s latest proxy statement raised eyebrows this week. In addition to providing a historically large exit salary, the company disclosed it is paying around a million dollars to staff and furnish an office for its retired CEO.
Palmisano’s retirement package is worth approximately $271 million, according to Footnoted.com‘s Michelle Leder, who has been analysing SEC filings since 2003.
According to the Wall Street Journal, if that figure is correct, Palmisano’s would be one of the 10 highest CEO pay packages in history. Only six US CEOs have left with packages valued in excess of $200 million.
An IBM spokesman said in a statement to CNBC that the figure depends on “a number of assumptions and speculations on IBM’s stock value and performance well into the future,” so it may over- or underestimate what he eventually receives.
Palmisano’s newly renovated office will be staffed and maintained as long as he wants it, the company said. The company’s proxy filing describes the expense in two different ways:
“Payments relating to furnished office space and administrative support provided to Mr. Palmisano after his December 1, 2012 retirement, as well as amounts for the renovation of the space.” (On page 39 of the filing.) And “personal use of company autos, retirement items, office payments and administrative support, including space renovation.” (On page 40 of the filing.)
IBM spokesman Edward Barbini told CNBC that these funds were being set aside to “establish an office for a former CEO off of the IBM campus,” but he did not explain why refurbishing or staffing the office would cost that much.
What will Palmisano use the office for? According to the proxy filing, Palmisano “may be asked from time to time” to provide consulting services for IBM. If he spends four hours consulting, he gets paid $20,000. If he spends less than that, he’ll be paid $10,000. (As of December 31st Palmisano hadn’t been paid any consulting fees.)
The amount spent on the office is tiny compared to Palmisano’s overall exit package. It’s even tinier compared to the amount IBM’s value improved under his watch.
As Michelle Leder of Footnoted.com says:
The disclosure in IBM’s proxy statement filed earlier this week probably doesn’t rank quite as high as former Tyco CEO Dennis Koslowski’s $6,000 shower curtain or former Merrill Lynch CEO Jon Thain’s $35,000 commode. But that’s only because we’re lacking some of the details on what IBM spent $1.03 million on for what it describes in its proxy statement as “space renovation” for former Chairman and CEO Samuel J. Palmisano.
Leder continues: “We should also give IBM and/or Palmisano credit where it’s due: if Palmisano had retired after Dec. 31, instead of Dec. 1, most of these details would have forever been hidden since by the time IBM’s 2013 proxy came out, Palmisano would no longer have been a named executive.”
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