Pfizer's McKinnell to Get $180M Package
Thursday, December 21, 2006; 10:52 PM
NEW YORK -- Pfizer Inc.'s former chief executive, Henry A. McKinnell, who was forced into an early retirement in part because of investor anger about his rich retirement benefits, will get every penny of it and more, a new regulatory filing shows.
McKinnell's package, which the company disclosed in a filing with the Securities and Exchange Commission Thursday, totals more than $180 million. It includes an estimated $82.3 million in pension benefits, $77.9 million in deferred compensation, and cash and stock totaling more than $20.7 million.
The total value could grow to almost $200 million if McKinnell gets a $18.3 million stock award, but that is contingent on the future performance of the stock of the world's largest drugmaker.
The company said McKinnell's departure "contractually obligated" it under his employment agreement to provide McKinnell with certain severance payments and benefits.
The deferred pension sum includes $67 million of his own money from prior compensation he chose to set aside, the company said in the filing.
Beyond that, Pfizer will pay a lump sum severance of $11.9 million and will fully vest stock grants worth $5.8 million, according to the filing. He also will receive $2.2 million for 2005 bonus payments, $305,644 for unused vacation time and $576,573 for benefits he would have received had he stayed at the drugmaker.
The package also provides him with an annual pension of $6.6 million until he dies. Pfizer estimated the pension's lump-sum value to be $82.3 million.
McKinnell vacated the CEO spot in July, 19 months before he was scheduled to step down, under pressure from investors angered about his retirement package and a drop of as much as 40 percent in the company's stock price during his five years in charge.
For some investors, already angry over the stock's slide, McKinnell's retirement package was a flash point. At Pfizer's April annual meeting in Lincoln, Neb., a plane flew overhead trailing a banner that said, "Give it back, Hank!" Two proxy advisory companies had called for removal of board members and the AFL-CIO led a protest against the retirement package. The board members were re-elected, however.
McKinnell earned $5.97 million in salary and bonus in 2005. When the company's proxy was filed with the Securities and Exchange Commission in March, his total compensation for the year was valued at $15.88 million, including salary, bonus, stock options, stock grants and benefits. The value of options and stock varies with the share price.
McKinnell's perquisites in 2005 included $8,500 in financial counseling, $65,120 for use of a car and driver and $43,855 for personal use of company aircraft, according to the proxy.
New Chief Executive Jeffrey B. Kindler also became chairman Tuesday, replacing McKinnell, who was not slated to leave until February.
Pfizer declined to make McKinnell available Thursday, and a spokesman emphasized the differences between McKinnell's pay package and Kindler's.
Kindler has no contract, has a much lower annual salary than McKinnell and has more pay tied to the stock's performance, according to spokesman Paul Fitzhenry.
Those differences may not be enough to quench shareholder's anger.
"It's a very big package and I'm sure it's going to raise investor concerns, however, it's contractual," said Charles Elson, chair of the Weinberg Center for Corporate Governance at the University of Delaware. "The question is not that they've paid it, but why, initially, such a contract was entered into."
The company, which has pledged to cut $4 billion in costs by 2008, is expected to undergo a radical shake up. Pfizer said in late November that it would look for even deeper cuts. Then it suddenly halted development of cholesterol drug torcetrapib because of safety concerns. The company had spent $800 million developing torcetrapib and hoped it would be a blockbuster.
Pfizer shares fell 14 cents to $26.07 Thursday on the New York Stock Exchange.