Golden Hello

With that golden phrase, let me first wish you all a happy new year!

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Sidebar: NYTimes has a series of articles on executive pay. In particular, this interactive graphic is a must see!

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I have heard ofgolden parachutes or golden handshakes in the context of executive compensation (and the latter is used quite frequently in India for worker layoffs), but "golden hello" is a new one -- at least to me. This fabulous NYTimes piece leads off with it:

It’s called the “golden hello.”

For a chief executive of a large corporation, it is the one thing — more than the corporate jet or any other perk — that must be guaranteed before the executive will move to run another company. [...]

Such golden hello payments are intended to make the executive “whole” — in essence to treat the executive as if his career were one smooth ascent with no costly interruptions. And these multimillion-dollar payments and perks are used to draw in not only chief executives, but virtually every member of the executive suite. If “golden parachutes” — rich exit packages of extra cash, stock or retirement benefits — are needed at times to kick out chief executives, golden hellos are increasingly needed to get them in the door.

Link via Mark Thoma who quotes from an e-mail he received:

The "golden hello" is a new term to me. A good example of it is Carly Fiorina's package when she left Lucent: HP picked up the "value" of her Lucent options, nice for her since Lucent proceeded to nose dive shortly after she left.

When the next company picks up the options it removes what the options are supposed to do in the first place: bind the CEO to the company and give him/her incentive to perform. Combined with the golden parachute the CEO has little incentive to do anything. using Fiorina again, estimates are as high as $200mil for her total compensation at HP for a pretty lousy performance. Now she wants to take credit for HP's rise after she was fired, but funny, she isn't interested in taking credit for Lucent's fall.