Image: Wagoner
Charles Dharapak  /  AP
Wagoner will retire Aug. 1 with a pension and benefit package valued at more than $10 million.
updated 7/15/2009 9:50:33 AM ET 2009-07-15T13:50:33

Former General Motors Corp. Chairman and CEO Rick Wagoner will retire Aug. 1 with a pension and benefit package the automaker valued at more than $10 million.

Wagoner, 56, who was ousted by the Obama administration on March 30, will get $1.64 million in benefits annually for each of the next five years, plus an annual pension of $74,030 for the rest of his life, according to company documents filed Tuesday with the U.S. Securities and Exchange Commission.

The former CEO, who spent 32 years with the company, can also choose to cash out his company-provided life insurance policy at $2.6 million, according to the filing.

The benefits are worth about half the $22.1 million value that the company placed on Wagoner’s retirement package at the end of 2008. The severance package is also far smaller than those afforded to many other large-company CEOs in the past, before the market meltdown made compensation practices a touchstone for public and congressional outrage.

Lee Raymond, former chairman of energy giant ExxonMobil, received a nearly $400 million retirement package in 2006. Stan O’Neal, ousted from Merrill Lynch in 2007 after the investment bank reported a huge quarterly loss, walked away with $161.5 million in stock, options and retirement benefits. Walt Disney Co. directors awarded a $140 million severance package to Michael Ovitz at the end of his brief stint in the mid-1990s as president of the entertainment company.

Although many GM retirees whose benefits have been cut or investors who lost money may consider Wagoner’s package excessive, it is not out of line in comparison to other executives’ pay, said Aaron Boyd, a research manager with Equilar Inc., an information services firm that specializes in researching executive compensation.

“For a company making billions of dollars in revenue, an executive regularly making millions of dollars every year, I think a $10 million retirement package, considering the length of time that he’s been with the company, I think it’s certainly understandable,” Boyd said.

Wagoner’s package comes at a time when the company slashed benefits for most of its retirees, including eliminating vision and dental coverage. Health benefits for blue-collar retirees also are somewhat at risk because they soon will be paid by a union trust that is largely funded by stock in the new GM.

Wagoner was credited by industry analysts with restructuring GM more than any other CEO in its history, shedding thousands of jobs while globalizing and energizing its vehicle design, engineering and manufacturing.

But since he became president and CEO in 2000, the company’s shares have tumbled in value. In 2000, GM shares topped $92, according to the Center for Research in Security Prices at the University of Chicago. Trading of the stock, which stayed with the old GM still in bankruptcy protection, was suspended as of Friday at $1.15 per share. The company has said repeatedly that it likely will have little or no value.

In the past four years, GM has racked up more than $80 billion in losses as the recession and high gas prices cut into its sales.

Wagoner’s ouster came at the hands of former Obama administration autos task force leader Steven Rattner, as the administration rejected a GM restructuring plan and ordered deeper cuts.

Wagoner has remained on the GM payroll since his ouster, but he had been working for $1 per year since late last year. Company spokeswoman Renee Rashid-Merem said GM disclosed last year that it had annual pensions for top executives by two-thirds.

GM has received $50 billion in U.S. government loans. On Friday, the automaker emerged from a 40-day stay in bankruptcy protection with its best assets moving to a new company called General Motors Co. The U.S. government owns more than 60 percent of the new company, with hopes of selling stock to get some of its investment back, perhaps as soon as next year.

Wagoner earned $14.9 million last year at GM, although $11.9 million of that was in the form of stock and options which are now worthless.

He also was entitled to $366,602 in unvested stock awards and $534,627 in deferred compensation as of Dec. 31, according to GM’s 2008 annual report. At the time, Wagoner got to keep about 3 million stock options, which allow him to buy GM shares at prices ranging from about $20 to $76.

As a condition of GM’s government loans, the automaker is not allowed to pay severance packages to departing executives. Government officials began to crack down on so-called “golden parachutes” after last fall’s backlash over $24 million in exit packages for the ousted chief executives of mortgage finance companies Fannie Mae and Freddie Mac. The severance payments were never made. Former AIG chief Robert Willumstad opted out of his $22 million severance package after being deposed as part of the insurer’s government bailout last September.

From the beginning of his career at GM through the end of 2008, Wagoner received compensation totaling about $63.3 million, with $38.7 million of that coming during his years as chief executive. The totals take into account Wagoner’s base salary, cash bonus payouts, long-term incentive plan payouts, gains from stock option exercises, and other compensation.

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