BP’s blundering CEO Tony Hayward didn’t escape the wrath of the U.S. media even after agreeing to step down on October 1. Amid the general cries of good riddance to the man accused of trying to minimize the extent of BP’s Gulf oil spill, MSNBC’s Ed Schultz erred inexcusably in the other direction by overestimating Hayward’s severance pay a thousand times. (Like many of his U.S. media colleagues, Shultz also wrongly called the company “British Petroleum,” which it hasn’t been since 1998.)
In his The Ed Show, Schultz commented sarcastically, “Well, Tony, don’t feel too bad. Remember, you still have that $18 billion severance package and a lot of space to spend it in.” That’s billion with a “b” – a ludicrous figure, repeated without correction in the show’s online transcript, which raises a big question mark over Schultz’s numeracy.
In fact, the media generally calculate Hayward’s severance pay at $18 million (with an “m”), or about ₤12 million. As The Economist reports, “Mr. Hayward will receive severance pay of a year’s salary (about £1m, or $1.6m) and the right to start drawing from a pension pot conservatively valued at £11m.” He is also to become a non-executive director of BP-TNK, the company’s joint venture in Russia, an appointment gleefully described by both the U.S. and British media as Hayward being “sent to Siberia.”
As for the severance pay, The Economist notes, “this ‘payment for failure’ has prompted outrage: ‘£12m payoff for Captain Clueless,’ fumed a typical headline. Edward Markey, a congressman, grumbled about ‘multi-million-dollar golden parachutes.’”
But The Economist puts the payment into the kind of sober perspective clearly incomprehensible to Schultz. “This [the criticism] is unfair,” the magazine writes. “Mr. Hayward has worked at BP for 28 years, most of them successful. At least half of his pension pot was earned before he became chief executive. And the plunge in BP’s share price has wiped out the equity-related part of his pay package as CEO—a significant punishment.”
Anyway, Hayward’s package pales in comparison with the most notorious American examples. According to often-quoted research entitled Are Large CEO Severance Packages Justified?, published in September 2007 by the Kellogg School of Management:
Robert Nardelli, the former CEO of Home Depot, received $210 million, Disney’s Michael Ovitz received $140 million, Conseco’s Stephen Hilbert received $72 million, and Hewlett-Packard’s Carly Fiorina received $21 million. Even the average CEO severance package—$5.38 million when severance is negotiated prior to employment—raises eyebrows among the most vocal opponents of excessive severance pay.
Meanwhile, The Business Insider, a frequently provocative business news site, claims to have discovered why BP did not offload Hayward earlier.
In a story entitled The Real Reason BP Kept Tony Hayward So Long, The Business Insider writes that Hayward was “chewed to bits in the press over his management of the Gulf oil spill.” It continues:
But that’s exactly why the new CEO Bob Dudley is so lucky. At least according to a piece in Fast Company by Robert Sutton, a professor of management science and engineering at Stanford. For a new CEO, says Sutton, it’s all relative. “Because of the power of psychological contrast, the more that Mr. Hayward comes across as an insensitive buffoon, the better a scapegoat that Mr. Hayward becomes–and the better that Mr. Dudley looks in contrast.” Sutton gives credit to the BP board for keeping Hayward on during these last two months. He took all the abuse while the crisis was unfolding. Now that a solution finally seems to be in sight, a new leader like Dudley can step in and start off with success.
Now that’s a much more interesting story than Shultz’s wildly inaccurate bleating as he follows the vengeful herd.
