There’s no question that top executives don’t retire like the rest of us: See Sam Palmisano’s nine-figure retirement package from IBM (IBM), or more recently, the $89,000-a-month “allowance” for former General Electric (GE) Vice Chairman John Krenicki, which Michelle footnoted last week.
But less august executives can still rake it in on the way out the door. Jan Spencer retired in April after 34 years at Kimberly-Clark (KMB) — the big tissue-and-diaper company perhaps best known for Kleenex and Huggies. He left with the title of senior vice president, and a two-year consulting agreement, filed with this 10-Q, that will pay him a minimum of $1,000 an hour.
Most people don’t envision working full time in retirement, and Spencer won’t have to. His contract specifies that he is to work “a maximum of 200 hours per year” — which works out to just under four hours a week, or almost 17 hours a month. It also promises him a flat $50,000 per quarter, or $200,000 a year.
That makes the math simple: $1,000 an hour, unless he works less than the maximum, in which case his hourly rate could be dramatically more. For example, if he works three hours a week (156 hours a year), he’ll be making $1,282 an hour. You get the idea.
Just for context, at $1,000 an hour, he earns the federal minimum hourly wage roughly every 26 seconds. Or, put another way: He earns in just under 15 hours what a minimum-wage worker earns in a year.
And if he should happen to work more than 200 hours in a year, the consulting agreement notes, “Mr. Spencer shall be compensated at a rate to be agreed upon by the parties.”
It’s never clear just how much of a sinecure any given consulting agreement really is. We’ve seen one or two companies admit that they weren’t getting much from an existing consulting agreement, but generally, the arrangements make it sound like the retired executive’s services are invaluable.
In this case, Spencer is promising to provide vague “consulting services (the ‘Services’) and such other work as requested from time to time by K-C’s Chief Executive Officer…”
But language earlier in the agreement make clear why they’re really paying him princely sums for part-time work: Like at GE, this is another example of paying someone to keep him off the market — and out of competitors’ offices.
The document spends four paragraphs on how valuable Spencer’s knowledge is, noting that he has spent years
“in upper-management level positions, in which Mr. Spencer has obtained knowledge of and full access to the full range of the confidential, proprietary information of K-C that is competitively valuable, much of which constitutes trade secrets…”
It goes on to call his knowledge “thorough, both in terms of the breadth … and in terms of depth…” — and notes that the company “would suffer serious competitive harm if Mr. Spencer were to perform any services for a substantial competitor…” Then there’s a single sentence saying, oh yeah, “Kimberly-Clark “wishes to continue to retain Mr. Spencer’s services…”
It wasn’t all that long ago that there was a flurry of headlines about attorneys having the audacity to bill $1,000 an hour or more; this WSJ blog item talks about how “some big machers in the U.S. are asking as much as $1,250 an hour…” Those lawyers, of course, are generally helping companies avoid lawsuits, or fighting presumably important cases in court.
Spencer is getting more for consulting, or, really, not going to work for the other guy. Which makes us think: Those lawyers probably know a bunch of confidential information that amount to trade secrets. Maybe instead of slaving over dusty briefs all day, they could get just as much for not representing the other guy.
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