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Originally published Saturday, March 22, 2014 at 8:02 PM

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For Time Warner Cable exec, billowing golden parachute

The extraordinarily large exit package for Time Warner CEO Robert Marcus is one more example of corporate America rewarding executives with outsize sums for sometimes minimal amounts of work, and it comes despite the growing debate over income inequality in America.


New York Times News Service

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Robert D. Marcus became chief executive of Time Warner Cable at the start of the year. Less than two months later, he agreed to sell the company to its largest rival, Comcast, for $45 billion.

For that work, he will receive nearly $80 million if the deal closes, a severance payment that amounts to more than $1 million a day for the six weeks he ran the company before agreeing to sell.

“It’s not unprecedented, but it is rare and troubling,” said Robert Jackson Jr., an associate professor at Columbia Law School. “There’s something stunning about such big paydays for such a small amount of work.”

The extraordinarily large exit package is just one more example of corporate America rewarding executives with outsize sums for sometimes minimal amounts of work, and it comes despite the growing debate over income inequality in America.

“The numbers are already big now between executives and regular people,” said David Larcker, a professor at Stanford Law School. “This exacerbates those comparisons.”

So-called golden parachutes are common features in the employment contracts for public-company executives, and they often reach stratospheric heights. And although Marcus is in line to receive a huge sum, his payout will not be anywhere close to the largest golden parachutes of all time.

When Jack Welch left General Electric in 2001, he reaped rewards of more than $417 million, according to GMI Ratings, a corporate-governance research firm.

Dozens of executives have received exit packages larger than $150 million, including Lee R. Raymond, who received $321 million when he left Exxon Mobil in 2005, and William McGuire, who took home $286 million upon leaving the UnitedHealth Group in 2006.

But the payment to Marcus, 48, which was disclosed in a regulatory filing last Thursday, is nonetheless spectacular because he was chief executive for such a short period, while Welch, Raymond and McGuire had been at their companies for years.

Most of the payment due Marcus is part of the change of control clause in his contract, which is set off when a company is sold. Such golden parachutes can be among the biggest paydays for executives.

Perhaps the largest package was the $214 million that John Kanas received after selling North Fork Bancorporation to Capital One Financial in 2006. That same year, James Kilts, chief executive of Gillette, received $185 million when Procter & Gamble bought his company. And in 2011, Sanjay Jha, chief executive of Motorola Mobility, was in line for $65.7 million after he sold his company to Google.

Other change of control clauses, which have not yet been invoked, are even bigger.

The chief executive of the Simon Property Group, a mall developer, would receive $245 million should his company change hands on his watch, according to the Standard & Poor’s ExecuComp database. Steve Wynn, of Wynn Resorts would receive $239 million if his casino company was sold. And David Zaslav, chief executive of Discovery Communications, would get $232 million if his collection of cable networks found a buyer.

Compensation experts contend that golden parachutes can be in the best interests of shareholders. Without one, a chief executive might not want to sell the company and lose his salary.

What is more, many golden parachutes are structured to reflect the total value of salary, bonuses and stock options that executives would receive over the duration of their employment.

But critics see the packages as distorting influences that create incentives for chief executives to sell their companies.

“I don’t understand how these payments can be thought to align the interests of CEOs with shareholders,” Jackson said.

Executives can receive golden parachutes not only when they sell their companies but also when they retire, and even when they are fired.

In January, Henrique de Castro was ousted as chief operating officer of Yahoo after clashing with the chief executive, Marissa Mayer. Despite his subpar performance during his 15-month tenure, de Castro walked away with at least $88 million and as much as $109 million.

Golden parachutes first appeared in the 1970s and proliferated in the 1980s. And while recent regulation has given shareholders a voice through say-on-pay votes, it has not damped executives’ enthusiasm for big paydays.

Time Warner Cable shareholders can express their displeasure with the package when they vote on the deal, which they are almost certain to approve. But even if they voice their disapproval of the golden parachutes, it will not change a thing. Such votes are nonbinding.

Time Warner Cable and Comcast both declined to comment on the matter.

Should the deal close, Marcus will receive $56.5 million in stock, $20.5 million in cash and a $2.5 million bonus if Time Warner Cable meets its performance targets by the time the deal is completed.

Executive-compensation experts said there were few ways to curb the practice of awarding golden parachutes but that shareholders should voice their opinions nonetheless.

“If Time Warner Cable shareholders are sufficiently outraged, they can vote against it, and if executives are sufficiently embarrassed, it might discourage other CEOs from doing the same thing,” Jackson said. “But I’m not optimistic.”



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