FAIRFIELD, Conn. - For retired General Electric Co. Chairman and Chief Executive Officer Jack Welch, like many others who once led large U.S. companies, these are the golden years.
Welch gets a $9 million annual pension. For any day when he offers General Electric advice, he earns an additional $17,000. He was able to build his nest egg by putting part of his salary into an account on which the world's largest company by market value guaranteed 10 percent annual interest.
Big-league CEOs often award themselves lifetime benefits that would be the envy of most Americans. The companies say it's the only way they can attract top talent and reward performance. Shareholders want the payouts reined in as stocks and earnings of many companies are falling.
"We're seeing more and more abuse in this area," said Patrick McGurn, director of corporate programs at Institutional Shareholder Services, which advises many of the managers of the largest U.S. funds on corporate governance. "Executives are getting the long end of the stick."
Welch's former peers will fare almost as well.
FleetBoston Financial Corp. Chairman Terrence Murray will get $5.8 million annually after he retires at year's end. Bernard Ebbers, ousted as WorldCom Inc.'s CEO, can rely on a $1.5 million annual pension and medical benefits for life. International Business Machines Corp. will pay ex-chief Lou Gerstner's car, office and club membership expenses until 2012.
"It doesn't make a whole lot of sense," said James McGlynn, who manages the $65 million Summit Everest Fund and owns FleetBoston shares. "Who's setting these plans where everybody's getting all this money?"
Critics blame the companies' boards. In many cases, the directors are CEOs themselves, with little incentive to restrain compensation, they say.
"It's one big buddy system: You scratch my back, I'll scratch yours," said Larry Margel, former chief actuary at Towers Perrin, a New York-based company that advises companies on compensation.
Gary Sheffer, a spokesman for General Electric, said Welch's pension is justified because of the $375 billion gain in market value he helped create over two decades. The company raised the pension for all retirees six times during Welch's tenure, the last time in April 2000, he said.
That doesn't sit well with General Electric retiree Helen Quirini, who worked at a plant in Schenectady, N.Y. for 39 years. She figures her pension of $765.40 a month is about 1/800th that of Welch's. Quirini, who began at General Electric in 1941, said she remembers when the lowest-paid worker made about 1/20th as much as the top executive.
"Is any person worth 800 times as much as another person?" Quirini asks.
It isn't as if executives such as Welch didn't have a chance to sock money away for retirement, Quirini contends. Welch, whose wife is seeking a divorce and half the couple's assets, left with options on $250 million in General Electric stock and a fortune estimated by Forbes magazine at $680 million.
By contrast, rank-and-file workers often must count on their savings as companies scale back traditional pension plans.
About 20 percent of American workers are covered by defined-benefit plans, the kind that pay a fixed amount after they retire, compared with 43 percent in 1975, according to the Employee Benefit Research Institute. Workers rely more on 401(k) savings plans, and they don't always get contributions from their employers.
"As the benefits of the rank-and-file get smaller and riskier, the benefits of the highly paid become more secure and generous," said Karen Ferguson, director of the Pension Rights Center, a lobbying group in Washington.
Some executives can pick and choose among their best compensation years to guarantee higher pensions.
In August, FleetBoston directors approved a new retirement plan for Murray that lets him use his three highest years of compensation from 1996 to 2000 and include gains from exercising stock options in calculating his pension, according to the company's proxy statement.
FleetBoston spokesman James Mahoney didn't return calls seeking comment. The change was justified because Murray has built the company into the seventh-largest U.S. financial institution, the statement said.
Summit Everest's McGlynn disagreed, noting that FleetBoston hasn't performed better than its rivals. In the five years that ended April 30, its shares rose 16 percent compared with 38 percent for the Standard & Poor's Banks Index and 34 percent for the S&P; 500 Index as a whole.
"There ought to be some correlation between the stock price and your compensation," McGlynn said. "If that's the going rate for that kind of performance, God help us."
Coca-Cola Co., Boeing Co. and Abbott Laboratories are among a number of companies that include stock grants, salary and bonus in calculating executive pensions.
Boeing estimates that Chairman Phil Condit's pension would pay him $1.5 million a year, up from about $650,000 in 1999, matching his annual salary.
Such an increase is typical at many large companies, but Margel said it raises eyebrows because the head of Boeing's compensation committee is John Biggs, a well-known advocate for better corporate governance. Biggs is CEO of the Teachers Insurance and Annuity Association-College Retirement Equities Fund, or TIAA-CREF, which has lobbied for fuller disclosures of executive compensation.
"It strikes me as odd that someone from TIAA-CREF would be so prone to go along with that," Margel said.
Biggs declined to comment. Condit's pension reflects rising compensation and, with it, performance, Boeing spokesman Larry McCracken said.
Executives often get benefits aside from money.
Philip Morris Cos. has said it will provide a car and driver and financial advice worth $15,000 annually to retiring Chairman Geoffrey Bible, who made $25.4 million last year.
Occidental Petroleum Corp. CEO Ray Irani's contract guarantees that he and his wife continue receiving medical benefits for life even if he's fired.
Some compensation experts say retirement perks for the top ranks began to rise after 1974, when Congress passed the Employee Retirement Income Security Act. The law, partly intended to level executive pensions, limited the amount companies were permitted to put into tax- favored trusts for each employee. Companies responded with a new class of supplemental plans, Margel said.
"A lot of companies cut back on the basic plan and then put in a Cadillac for the senior people," he said.
Quirini, 82, has urged pension increases at General Electric shareholders meetings for two decades. She said she always ends her speeches with: "For goodness sake, give us our raises before we're dead."