PFIZER'S MCKINNELL TO GET $180 MILLION RETIREMENT PACKAGE

Yahoo Finance ^ | 21 December 2006 | Ellen Simon

[dakine]

You're overpaid...See, my opinion about someone elses paycheck means nothing...

[MeneMeneTekelUpharsin]

You're overpaid

You're right. And I make up for it by working extensive overtime for free to do my job right -- literally.

[dakine]

I make up for it by working extensive overtime for free

It is not free...if it was free, you could/would stop yesterday...

[Puddleglum]

What a bunch of class-envy freepers here!!

Oh shudder - class envy! I don't think it's envy. I think it's shock at what appears to be an excessive amount of money. Is it excessive? Probably. Is it market-controlled? If so, the market is broken. Good old boy cronyism and back-scratching, I suspect.

We don't live in a lasisse-faire economy and this is one indicator.

[Puddleglum]

He oversaw VIAGRA hitting the market.

The real trick was getting Viagra to be covered under most folks' insurance plans - added to the formulary. Grandpa not getting excited enough is a medical crisis now, and that helps the pill maker out immensely. I'm sure it was a market decision.

[tom paine 2]

This money rightly belongs to the shareholders. Hank mckinnel did not do anything of note except preside over a cash cow enrihed by Viagra and Lipitor.

[Hot Tabasco]

If much more of this occurs, we're going to see major sociopolitical turmoil result. Now, right that down and see if it does or doesn't come true.

I agree with you. I just got canned on 12/1 by a shoot from the hip vindictive VP of HR after almost 35 years of employment. I was at leasted afforded the mandatory severence package of 4 months salary but that allowed them to successfully deny me the additional 8 months of partial salary had they kept me on a few days longer and laid me off as was the original intent.

I have absolutely no legal recourse as Michigan is an "At Will" state........

At age 56 its going to be rather difficult to find comparable employment here in S.e. Michigan. So if I happen to post some rather negative comments about individuals such as this Pfizer guy, rest assured, it ain't about class envy.......

[palmer]

He put 35 years of his life into that work, 11-12 hours a day, business savvy, and a strong moral code.

[palmer]

people like this aren't "building" great american companies - they are looting them.

That's completely incorrect.

[Honorary Serb]

Under McKinnell, Pfizer swallowed up two great companies--Warner-Lambert and Pharmacia. Most of Pfizer's best selling drugs (all except for Viagra) came from those two companies, especially Pfizer's largest selling drug, Warner-Lambert's Lipitor. Pfizer's new cancer drug, Sutent, came from a biotech company that had been acquired by Pharmacia.

In the process of its acquisitions and integrations of these companies, Pfizer laid off many hundreds of people. It also totally destroyed the R&D assets of its acquisitions, as well as that of the original Pfizer!!!! The last major drug to come out of Pfizer R&D was Viagra. What Pfizer does well is marketing, and using all its cash for acquisitions.

Pfizer just had a major late-stage drug failure, for a drug to raise "good cholesterol". Those things happen. However, Pfizer has nothing major in its pipeline to replace it, because of its wrecked R&D.

That is why Pfizer is in trouble. But McKinnell gets his big pension anyway.

[MeneMeneTekelUpharsin]

A recession is when your neighbor loses his job. A depression is when you lose yours.

[Aquinasfan]

I thought this was a country where people wanted to become rich instead of just hating others for getting there?

It's a matter of justice.

Historically, the ratio of CEO pay to the lowest wage-earner in a company has gone from 50:1 four decades ago to 821:1 today. See chart.

I don't see any simple solution, but there is a problem here that needs to be addressed.

[Old_Mil]

Another example:

ROUND ROCK, Texas (AP) - Incoming Dell Inc. vice chairman and chief financial officer Don Carty, the former American Airlines chief who left three years ago when American's parent was struggling to remain solvent, will earn $700,000 when he starts at the computer maker next month. Details of Carty's salary, approved by Dell's board of directors, were included in a regulatory filing with the Securities and Exchange Commission. By fiscal year 2008, Carty will be eligible to receive a bonus equal to 100 percent of his base salary. He also will receive a grant of 190,000 options plus another 50,000 restricted stock units

Don Carty is the former - now fired - CEO of American Airlines. He oversaw the decline of American from the highs it reached under Robert Crandall to it's post 9-11 depths. However, his firing was related to (you guessed it) mishandling the executive compensation packages of others. The man knows absolutely nothing about the computer industry...hiring an individual with such a demonstrated lack of talent certainly is not based on providing value for Dell shareholders. It's not based on his past industry experience. It may be based on where he plays golf, however.

Meanwhile, before promoting Gerard Arpey from within, American Airlines had actually considered tapping an academic - the president of the Univ of Oklahoma with no experience in the airline industry - to lead American.

[Old_Mil]

And to be fair, there is another side to this story: executives who get it. Unfortunately, this style of management seems to be in short supply today...

Costco jobs are so well compensated; the company itself has an unusually forward-looking corporate philosophy.

Costco CEO Jim Senegal has said: “We pay much better than Wal-Mart. That’s not altruism. It’s good business.”

Chief Financial Officer Richard Galanti explained: “From day one, we’ve run the company with the philosophy that if we pay better than average, provide a salary people can live on, have a positive environment and good benefits, we’ll be able to hire better people, they’ll stay longer and be more efficient.”

A 2004 Business Week study ran the numbers to test Costco’s business model against that of Wal-Mart. The study confirmed that Costco’s well-compensated employees are more productive.

The study shows that Costco’s employees sell more: $795 of sales per square foot, versus only $516 at Sam’s Club, a division of Wal-Mart (which, like Costco, operates as a members-only warehouse club). Consequently Costco pulls in more revenue per employee; U.S. operating profit per hourly employee was $13,647 at Costco versus $11,039 at Sam’s Club.

The study also revealed that Costco’s labor costs are actually lower than Wal-Mart’s as a percentage of sales. Its labor and overhead costs (classed as SG&A, or selling, general and administrative expenses) are 9.8% of revenues, compared to Wal-Mart’s 17%.

By compensating its workers well, Costco also enjoys rates of turnover far below industry norms. Costco’s rate of turnover is one-third the industry average of 65% as estimated by the National Retail Foundation. Wal-Mart reports a turnover rate of about 50%.

With such rates of employee retention, Costco’s savings are significant. “It costs $2,500 to $3,000 per worker to recruit, interview, test and train a new hire, even in retail,” said Eileen Appelbaum, Professor at Rutgers University’s School of Management and Labor Relations. “With Wal-Mart’s turnover rate that comes to an extra $1.5 to $2 million in costs each year.”

Other analysts of the retail industry agree that happier, well-compensated workers help generate bigger profits. George Whalin, president of Retail Management Consultants in San Marcos, Calif., disagrees with many of Wal-Mart’s critics, but said: “There’s no doubt Wal-Mart and many other retailers could do a better job taking care of their employees. The best retailers do take care of their employees — Nordstrom’s, Costco, The Container store — with fair pay, good benefits and managers who care about people. You have fewer employee issues, less turnover and more productivity. It lessens costs to the company.”

Still, Wall Street analysts intent on cutting up-front labor costs tend to frown upon Costco’s model. “Costco’s corporate philosophy is to put its customers first, then its employees, then its vendors and finally its shareholders. Shareholders get the short end of stick,” said Deutsche Bank analyst Bill Dreher.

But Costco’s stock has quadrupled in the past ten years, and has in the past year inched closer to Wal-Mart’s per-share-price. In fiscal year 2004, Costco recorded record sales and earnings. While Wal-Mart continues to profit and expand, its stock has lost value — in recent months it is 16% off its 52-week high — as sales have been more sluggish as gas prices cause customers to cut back on driving to and from the store. The negative publicity around the company has also caused some damage.

Of course, other factors besides low turnover and employee productivity are responsible for Costco’s efficiency. The company has a wealthier customer base than Wal-Mart’s; these customers buy higher-margin goods, purchase in bulk and have steadier spending habits. Costco also saves millions because it does not advertise.

Besides the efficiency of its workforce, another reason Costco can afford to pay more is that it cuts the fat from executive paychecks. The overall corporate philosophy is that workers deserve a fair share of the profits they help generate — not just a pat on the back or a new job title like “associate.”

For example, while CEOs at other major corporations average 531 times the pay of their lowest-paid employees, Sinegal takes only 10 times the pay of his typical employee. His annual salary is $350,000, compared to about $5.3 million awarded to Wal-Mart’s Lee Scott.

After California Costco workers ratified their Teamster contract last March, CEO Jim Sinegal said Costco workers are “entitled to buy homes and live in reasonably nice neighborhoods and send their children to school.”

That the company’s stated ideals match up with workers’ paychecks helps explain employee loyalty at Costco.

[Military family member]

I am more concerned with the $178 million tax abatement my county gave to Pfizer to build its newest factory.

[MeneMeneTekelUpharsin]

Historically, the ratio of CEO pay to the lowest wage-earner in a company has gone from 50:1 four decades ago to 821:1 today.

Great post on the statistic. It's not a matter of class envy, but one of more of an equitable situation. Oh well, you know, if people don't want to heed the warnings, they can later on read the writing on the wall.

[palmer]

You are the ones spraypainting the wall. The statistic is skewed (average instead of median, includes stock gains, etc) and does not serve a useful warning except perhaps about too much monetary liquidity causing inflated gains.

[Young Scholar]

I have no problem with successful executives making this much money. But given Pfizer's performance, I'd probably be a little upset if I were a shareholder. I suppose it really depends on whether this was part of the package he agreed to when he took the job, or some sort of "reward," which would seem totally unjustified.

[Young Scholar]

Historically, the ratio of CEO pay to the lowest wage-earner in a company has gone from 50:1 four decades ago to 821:1 today.

How is that statistic even relevant? The ratio of the average CEO's pay to the average American worker's pay might have slightly more importance, but really, it's still just a talking point for people consumed with class envy.

And what do you mean by "average CEO"? Do you count the guy who works 80 hours/week to build up the company he started 10 years ago that employs 100 people, and makes about $200,000 for it? I didn't think so. If you choose only the 500 top-paid CEOs in the country, of course the ratio is going to be high.

[Young Scholar]

Actually, I'll qualify my comment. If he shares responsibility for Viagra's success, he may well deserve this, despite Pfizer's mediocre performance more recently.