Omnicare’s $133 million man …

It’s not often the head of a $3 billion company walks away with more than $130 million.

But that’s what it looks like Omnicare (OCR) Chief Executive Joel Gemunder could do, with his abrupt retirement and replacement by Omnicare director Denny Shelton, the ex-CEO of Triad Hospitals. To us, it doesn’t sound much like the long-planned transition the company is calling it — nor (from the looks of things) to the market, which sent its shares down sharply this morning before recovering.

Gemunder is getting $16.2 million in cash as a severance payment, according to one of the 8-K filings made this morning by the company, which sells medication to nursing homes and assisted-living facilities. But that’s just the appetizer. His departure is being cast as a retirement, which triggers immediate vesting for his stock options and shares of restricted stock. As of the company’s April proxy, those were worth more than $21 million, though the company’s shares have fallen more than 10% since then.

Then there’s his pension. Its value was pegged at $87.3 million in the company’s proxy — but under its description of retirement and termination payments in the same document, the company said he would actually be entitled to a lump sum of $91 million if terminated under the terms of the plan. Presumably that figure is still about the same.

Why such a sweet pension? Because the board appears to have gone out of its way to enhance it. The company seems to have boosted the number of “years” of service the 71-year-old gets credit when calculating his executive pension — he’s credited with 45 years under the special pension for executives, but just 24 under the regular pension plan, and the proxy says the board can choose to do such things. Moreover, the proxy notes, the board’s

“Compensation Committee has determined that Mr. Gemunder’s lump sum amount be increased in an amount not less than $500,000 for each year of service after age 65.”

That accounts for at least $2.5 million of the pension’s value right there. Gemunder also can expect to collect on a big IOU from the company for deferred compensation, worth about $5.4 million, according to the April proxy.

Our rough estimate of the total, using figures from today’s filing and the proxy: More than $133 million, give or take with the stock market’s gyrations.

Mind you, Gemunder hasn’t been working at a discount to accumulate such a rich departure: His cash compensation alone last year was $4 million, and his total compensation was $25.2 million and $23.8 million over each of the last two years (counting increases to that mammoth pension of his). Is it any wonder the company saw fit to include in his perks $134,250 for tax and financial planning, and another $27,500 for “executive bookkeeping services.” Gemunder also controlled some 4.1% of the company’s shares, according to its last proxy.

All in all, that’s a lot from a company that has a market capitalization hovering under the $3-billion mark — not to mention one that has recorded a -11.9% total return over the last five years. By contrast, the company paid some $98 million last November to settle kickback allegations with the Justice Department, according to this article by the Cincinatti Enquirer’s Lisa Bernard-Kuhn. Ominously — the news comes two days before the company’s second-quarter earnings release.

On the flip side, Gemunder has been at the company quite a while — as president since May 1981, to be precise, and as CEO since May 2001. And Omnicare has beat the indexes since Gemunder’s ascension as CEO in May 2001, though it has trailed both the S&P500 and the Dow Jones Industrial Average since its debut in the early 1980s with Gemunder as president.

What do you think: Worth the price-tag?

Plus: We notice that Senior Vice President Cheryl Hodges, also the company’s secretary, also resigned effective July 31, according to this 8-K that Omnicare also filed this morning. Her severance is $2.1 million, plus stock-option and restricted-stock acceleration pegged at $3.2 million in the proxy. Hodges has accumulated $9 million in pension benefits. And, as Bernard-Kuhn’s article points out, Patrick Keefe stepped down as chief operating officer in June, with a two-year, $1.8-million consulting agreement.

Image source: Mykl Roventine via Flickr


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