Of all the nefarious perquisites invented by corporate connivers, none has so little redeeming social value as that form of executive incompetence insurance known as "the golden parachute."
Golden parachutes are a peculiar kind of long-term employment contract guaranteeing executives a job in the event the company they work for is the victim of a hostile takeover by another firm.
The origin of the name is lost in the folklore of finance, but the symbolism is obvious: if the company goes down in flames, the execs not only will be able to bail out, they will be financially secure.
The typical golden parachute amounts to a five-year no-cut contract, guaranteeing not only full salary, but retirement benefits, insurance, fringe stock options and sometimes even a bonus.
Martin Marietta passed out 28 of the pricey parachutes on Aug. 30, shortly after Bendix Corp. made its first bid to buy the Bethesda aerospace, aluminum, chemical and construction materials conglomerate.
Last Thursday--when it began to look like they might be in trouble--Bendix executives issued themselves 16 parachutes to assure they would not lose their jobs as a result of the Martin Marietta counteroffer to buy Bendix.
Some argument can be made for the Martin Marietta escape kit. Martin Marietta was ambushed by Bendix and rather than roll over, decided to fight. Martin Marietta contends it had to give its top people contracts to provide them a free hand in the battle with Bendix.
The contracts are needed "in order to help assure that these officers . . . will remain with the company during the pendency of the Bendix offer and to further help assure that they are free to implement the decisions of the board of directors regarding the Bendix offer without fear of job uncertainty in the event the Bendix offer is successful," Marietta told the Securities and Exchange Commission.
Maybe. But there's considerable doubt that all 28 Marietta execs risk being purged if Bendix takes over. It's hard to accept the idea that anyone would dare to fire the top 28 people at a company the size of Marietta -- the entire top management and the head of every single division -- and risk totally disrupting operations -- to say nothing of morale.
But Marietta's golden sky divers are truely needy cases compared with the Bendix executives who got the same protective parachutes.
If Bendix Chairman William Agee and his corporate cohorts lose their jobs in this takeover fight, it will be nobody's fault but their own.
Agee is no innocent victim, he's the one who started the brawl. After picking the fight, Bendix executives privately claimed they had a "no lose" situation -- at best they would take over Marietta and at the very least they would make several million dollars by selling their Marietta stock to somebody else.
Instead of a sure thing, Bendix executives are on the brink of a billion-dollar blunder, the most disastrous business miscalculation since Bunker and Herbert Hunt got caught in the collapse of the silver market and lost $1 billion.
Agee and company could end up not only losing the fight with Martin Marietta but also losing Bendix. The billion-dollar business placed in their trust could very well be broken apart, costing some employes their jobs and cities their chief industry.
For this potentially fatal foul-up, Agee is to be rewarded with a solid-gold parachute, a contract guaranteeing him $805,000 a year through 1987. Another 15 Bendix executives got three-year job guarantees at salaries of up to $435,000 a year. The total cost of the bailouts to Bendix will be $15.7 million.
Agee would get at least $4 million for shooting himself in the foot and mortally wounding his company with the richochet. Agee's audacity in giving himself a better deal than the rest of the Bendix boys is roughly equivalent to a kamikaze squad leader claiming the only parachute for himself.
Neither Bendix nor Martin Marietta invented golden parachutes, nor is this their first use in a Washington-area takeover fight.
Most of the recent merger matches have ended with top management of the losing company pulling the golden rip cord. Conoco executives got golden parachutes when the oil company was taken over by Du Pont -- even though Conoco was practically begging to become a takeover target.
When Allied Stores made an unsolicited bid to buy Garfinckel, Brooks Brothers, Miller and Rhoades Inc. a year ago, designer parachutes were quickly provided to Garfinckel Chairman David Waters and a few other executives. After the fight he put up to keep Garfinckel independent, Waters needed an escape hatch. Waters not only marshaled every legal maneuver available, he personally attacked Allied Chairman Thomas Macioce, absolutely assuring that he would lose his job when Allied took over.
Golden parachutes only occassionally can be justified as a reward for a job well done.
Martin Marietta's performance in the last two years would not ordinarily call for any special rewards to management: Three of Marietta's five divisions are losing money because of the recession. Stock that sold for $72 a share less than two years ago dropped this summer to $22, so cheap that Marietta became vulnerable to a takeover.
At Bendix, Agee has dramatically restructured the company, selling off two major assets for $760 million in cash and preparing to make acquisitions. But the Bendix board didn't discover that Agee deserved a five-year job guarantee until after the bid for Martin Marietta went awry.
Nor are the job guarantees issued by Marietta and Bendix comparable to the long-term contracts sometimes used to entice executives into taking a risky job.
When John Byrne was hired to bring Geico Corp. back from the brink of bankruptcy a few years ago, he got a multi-year, multimillion dollar deal. But that was the only way an all-but-broke company could get the leadership needed to survive. There are plenty of other top management posts that are so precarious no one would touch them without a no-cut contract.
If the risk of losing a job were the main criterion for deciding which executives should get golden parachutes, who would be more deserving than Washington's most vulnerable office holders -- elected and appointed government officials?
A presidential election is the governmental equivalent of a private sector proxy fight, so if the losing business management is guaranteed a salary, why not the losing politicians? Cabinet members could get golden parachutes so they, like Martin Marietta's executives, will be "free to implement the decisions . . . without fear of job uncertainty."
Taxpayers obviously would not tolerate bailout insurance for politicians. So why do shareholders tolerate it in business? Because golden parachutes are nearly always issued by a corporate management that is responsible to no one.
When the generous Bendix directors voted nearly $16 million worth of parachutes last Thursday, a majority of Bendix stock was already on its way into the hands of Martin Marietta. Once they've sold their shares, the Bendix holders have no legal right to complain. The Bendix board may not exist two weeks from now, so who could the stockholders complain to?
Martin Marietta isn't going to quibble over $16 million worth of job guarantees in a $1.5 billion takeover, nor is it likely to let $4 million in severance pay stand in the way of firing Agee. And with golden parachutes on their own backs, who at Marietta is going to criticize the Bendix bailout?
The irony of golden parachutes is that they frequently protect corporate hot shots who fancy themselves to be big risk takers. Corporate takeovers are supposed to be the Indianapolis 500 of fast track wheeling and dealing, and takeover strategists the Flying Wallendas of high finance.
But the Wallendas never used a safety net. Indy cars are not equipped with airbags. It doesn't take much of a hero to start a takeover fight when the winner gets a multibillion-dollar business and the loser falls into a $4 million golden parachute.