Do You Need An Agent?: As turnover mounts, more CEOs turn to sports- and entertainment-style negotiators - Careers - Chief Executive Officers - Statistical Data Included

Chief Executive, The, Nov, 2001 by Catherine Fredman

Handshakes Are Out

"Gone are the days when I'll accept your offer on a handshake and we'll figure out the terms later," says Wood. Salary and bonus are just the starting point of a discussion ranging from medical and life insurance coverage to financial support for a second home near corporate headquarters, travel expenses for regular visits if the CEO's family can't relocate, and, the ultimate perk, personal use of the corporate jet.

Even more important are the potential losses. Seasoned candidates have significant assets they risk forfeiting if they jump ship: unvested stock options, cash-bonus plans, and supplemental pensions that escalate in their final years at a company. That's where even the most do-it-yourself candidates appreciate expert advice. Chief executives are good at running a company, but when it comes to the arcane tax, Securities and Exchange Commission, accounting, and estate-planning issues introduced by a "make whole" award or starting bonus, comments Butler, in most cases, you can point out a lot of things they don't know about."

When Larry Bossidy became CEO of AlliedSignal, now Honeywell, in 1991, he called on Bachelder to ensure that his departure wouldn't reduce the pension he built up over 30 years at GE. Bachelder also advised Bossidy on how to handle his deferred equity options.

"He was helpful in arranging the best tax situation I could legally obtain," Bossidy recalls. "When you're sick, you go to a doctor. When you make a change like this, you should go to someone who knows all the ins and outs."

The payoff for Bachelder's knowledge: Bossidy's total compensation in 1999, his last full year on the job, was $48 million, including a $1 million merger completion bonus for AlliedSignal's acquisition of Honeywell. Brought back from retirement in July 2001 to take over in the wake of Michael Bonsignore's ouster, Bossidy did not use an agent to broker his one-year contract for $2 million in salary and a bonus of up to $2 million. He didn't need to. His previous retirement benefits, including pension, as negotiated by Bachelder, will resume when his one-year contract is up.

Edward H. Vick also turned to Bachelder and was impressed with the results. "Part of Joe's value is that he gets you to think about things like equity, change in control, and the ins and outs of non-competes in ways you would never have thought about," says the chairman and CEO of Y&R Advertising. "I have some experience with every aspect of a personnel contract, but my knowledge base is not world-class and that's where he makes the difference.

The world-class knowledge is especially important because most negotiations between candidate and courting company are conducted at top speed--less than a week in the case of McNerney and Nardelli, less than a weekend in the case of EDS' Richard Brown, also handled by Stucker. There's little time to research comparable compensation packages. Like a Live-minute chess game, the negotiations are all about knowing the moves, evaluating the permutations, grasping the ramifications, and making a quick decision. "I've got two very thick files of precedents, maybe a foot of contracts, stretching back 30 years," boasts Butler. "When the people on both sides are knowledgeable, you can move pretty quickly."