CEO Golden Parachutes Average $4.5 Million

February 10, 2005 ( - Almost 80% of Fortune 500 CEOs who retire or are pushed out of office receive separation pay with a mean present value that exceeds $4.5 million.

According to a study by New York University associate professor David Yermack, packages for fired CEOs can reach upwards of $7 million. Recently fired CEO Carly Fiorina of Hewlett-Packard will receive $21.1 million, according to a news release from the NYU Stern Business School.

Yermack’s research also shows that companies often to hide these costs in their Securities and Exchange Commission filings by tweaking the pension formula to diminish transparency to investors, according to the study.

“Much of the separation pay received by CEOs is not transparent to shareholders,” Yermack wrote. “Twenty-one percent of the severance benefits obtained by CEOs in my sample take the form of enhancements to defined benefit pensions, which are reported only in indirect ways and require analytical sophistication for valuation.”

Yermack wrote that an additional 27% of benefits are paid purportedly as compensation for service as chairman of the board after another executive has moved into the CEO position. Twenty-one percent represent payments due to the former CEO under pre-existing employment contracts. The remaining benefits take the form of lump sum payments as well as agreements for the CEO to work as a consultant and/or not compete against the firm, according to Yermack.

A copy of the paper is available at .