Pfizer (PFE) nearly doubled the compensation of its new CEO to $17.4 million last year even though Ian Read only got that job on Dec. 5, 2010 and was Pfizer's chief for just 26 days that year. The company also added about $10 million to the $24.7 million total pay packet of exiting CEO Jeff Kindler. The increases -- of 84 percent and 66 percent, respectively -- were almost completely unrelated to performance. Here's the pay summary (click to enlarge):
Kindler, for instance, got a pay raise from $14.9 million to $24.7 million simply because he resigned -- triggering an exit package -- and because he decided to acquire Wyeth in 2009 and Pfizer got bigger as a result, the company said:
[The compensation committee] adjusted Mr. Kindler's salary grade to reflect the increased size and complexity of the organization following the completion of the Wyeth transaction.This award was unrelated to any judgment of whether the Wyeth acquisition was a good idea or not. We now know that the Wyeth buy was at best a mixed bag because Read's new plan is to unwind much of it and make Pfizer 40 percent smaller. Put another way, the board of directors rewarded Kindler for something that it now regrets in hindsight.
Similarly, Read's compensation stems not from his managerial prowess but his advanced age and the fact that he's a Pfizer lifer. He was Pfizer's global president before he became CEO (so his pay reflects his former positon as well as his advancement to the corner office). About $10.9 million of his pay increase was in the form of a pension and deferred compensation, the company said:
The amount for Mr. Read reflects his attainment of the "Rule of 90" (age plus service equals or exceeds 90) in November 2010. This means that he will receive an unreduced pension benefit upon his retirement.Rewarding employees who devote their lives to a company is a good thing and ought to be encouraged (assuming they're actually performing and not watching the clock). But Pfizer locked in Read's jackpot pension payout by waiting a month too long to ask Kindler to leave and by not looking outside the company for cheaper or younger talent to fill the vacancy. When Kindler resigned, the company appointed Read immediately.
Pfizer's compensation committee consists of Robert N. Burt, W. Don Cornwell, Frances D. Fergusson, Suzanne Nora Johnson, and James M. Kilts, all of whom get paid more than $200,000 a year for their troubles.
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