We’re always fascinated by the revolving door — and how some executives seem to make money both coming and going. One of our favorite examples was back in 2011 when Synthes CEO Michel Orsinger was hired by Johnson & Johnson. We saw fresh evidence of that earlier this week when Hilton Worldwide filed its proxy.
As most people know, Hilton went public in Dec. 2013. By the time the company filed its S-1 on Sept. 12, its CFO, Thomas Kennedy, had already been gone for a month. While his separation agreement was attached to an S-1/A that the company filed on Nov. 8, we doubt that most people picked up on it.
Which brings us back to the proxy, which disclosed that Kennedy’s separation agreement tops out at $16.06m. That includes a payment of $1.06m for the next three years, even though Kennedy quickly landed another job as CFO of Hertz Corp. That part of the agreement was structured as a “restrictive covenant” which prevents Kennedy from working for any company “engaged in the business of owning, operating, managing or franchising hotel lodging properties and timeshares.”
We flagged Hertz’ hiring of Kennedy back in December for footnotedPro subscribers when it was announced because we like to track sudden comings and goings of CFOs. But we didn’t make the connection between the two companies until this past week.
Under his agreement with Hertz, Kennedy’s base salary is $660K a year, or $35K a year more than he was making at Hilton. But once you factor in the fact that Hilton will continue to pay him $1.06m for the next three years — unless he suddenly decides to work for another hotel company — and his annual base grows substantially.
Over the years, we’ve certainly seen other examples of people getting paid not to work. But a three-year agreement is longer than most others we’ve seen. And once you factor in that Kennedy was actually only out of work for a little over four months, it doesn’t seem like a great deal for Hilton’s investors, who haven’t exactly been rewarded by the company going public.