Leo Apotheker was paid $10 million to come on board as HP’s CEO and then he was paid another $13 million when he was fired just 11 months later. That’s $23 million dollars for less than a year of work. So how did he pull that off?
Easily. Apotheker’s contract made it extremely difficult to fire him with “cause,” thus his termination “without cause” provided for a handsome termination package. And this is all despite being fired for poor performance. The New York Times outlined what “cause” means, and its relationship to large severance packages for failed CEOs.
The legal definition of “cause” is different than the common definition. “Cause” is decided upon in a contract between the CEO and the company, and often someone can only be terminated with “cause” if they are convicted of a felony or some other agreed upon failure. “Cause” is not as all-encompassing as one would think. Since Apotheker, like many CEOs, was fired “without cause” (because the definition can be so narrow), he was entitled to all of the shares and restricted stock that he would have gotten had he completed a longer term as a CEO. It can be very difficult to fire a CEO with “cause.”
And Apotheker still has performance-based rewards that will garner him even more money if Meg Whitman finds success for HP!