As Black & Decker chief steps aside, he declines golden parachuteNo golden parachute as Black & Decker chief takes next step
Thursday, November 5, 2009
As head of Black & Decker for 24 years, Nolan D. Archibald was due a little parachute in case of severance. When the Maryland power-tool maker decided to merge with its rival Stanley Works this week, Archibald was entitled to open it and float away with $20.5 million.
Instead, he turned it down.
Has a new age dawned in the realm of executive compensation? Maybe yes, maybe no.
Under the merger deal, Stanley's chief executive, John F. Lundgren, will be named chief executive of the combined company, which is expected to have annual sales of $8.4 billion and about 40,000 employees. Such a change was enough to trigger Archibald's severance payment.
Instead he apparently decided his new pay package would be quite enough.
Although Archibald, 66, is stepping aside as president and chief executive, he is staying on as executive chairman of the board of directors. That requires going to board meetings and advising, not running the day-to-day operations, analysts say. And it pays well.
For the next three years, Archibald is expected to earn $1.5 million a year in base salary, according to filings with the Securities and Exchange Commission. Plus, there's a bonus package of up to $1.9 million a year. There are stock options. And a "cost synergy bonus" -- which experts translate as reaching certain cost-cutting levels -- would pay him up to $45 million.
There's also a Black & Decker pension, worth $35.5 million, as well as $15.7 million in a supplemental retirement savings plan. And he has extensive stock holdings in Black & Decker.
Bottom line: Archibald will be well compensated.
Archibald declined to discuss his compensation, but Black & Decker spokesman Roger Young said Wednesday, "He and the board agreed that was appropriate. I don't think we need to get into all of the details of how the conversation went. It is between him and the board."
Companies have become more and more sensitive about executive compensation packages recently. The Obama administration has demanded that companies that have received big government bailouts, including American International Group, Bank of America and others, slash compensation for their highest-paid executives.
"In this sort of market and economic environment, severance packages are a real hot button for boards," said Patrick McGurn, an executive compensation expert at RiskMetrics Group, an advisory firm.
Archibald, one of the longest tenured chief executives of a major company, arrived at Black & Decker in the '80s, when the company was struggling to keep its market share. Over the years, he turned the company around by cutting costs, improving the quality of its products and increasing sales, analysts said.
The Stanley merger is the biggest deal this year in the consumer products sector. The 99-year-old Black & Decker, based in Towson, has such brands as DeWalt, Kwikset and Price Pfister that will now join with Mac Tools, Stanley Security Solutions and FatMax from the 166-year-old Stanley Works, based in Connecticut.
Black & Decker's merger deal is expected to close in the first half of 2010. Both boards have approved the deal, which must still get shareholder and regulatory approval. Archibald's compensation agreement is "effective only upon consummation of the merger," the SEC filing states.