Firings are few and far between in executive suite

By Martha Graybow

NEW YORK (Reuters) - It's common for heads to roll in the executive suite. But only rarely do corporate chiefs actually get fired.

Two big exits on Wall Street over the past week -- Charles Prince from Citigroup Inc (C.N) and Stanley O'Neal from Merrill Lynch & Co Inc MER.N -- were cast as retirements, even as the companies were under intense pressure to oust them following huge mortgage-related write-downs.

"When push comes to shove, I really think that it's all about legacy. No one wants to be fired," said David Wise, a consultant at Hay Group, a management consulting firm. "It's much better to walk away on your own terms."

Corporate America much prefers to work out "friendly divorces" with executives rather than terminating their employment, experts say, because unless the person was fired for cause, companies can be forced to pay hefty severance under CEO employment contracts. And firing for cause rarely occurs.

"For-cause" firings often can't be carried out unless an executive is convicted of a serious crime or there is a major breach of company ethics, experts say.

Making a wrong-way bet on something like mortgage investments and taking billions in write-downs does not generally meet that standard, they say.

"It's usually a very high standard, something such as a felony" that's been committed, said Claudia Allen, chair of the Corporate Governance Practice Group at law firm Neal Gerber & Eisenberg LLP.

Firing can occur if there have been violations of a company's code of behavior, such as sexual harassment, experts say. Under such a scenario, companies can withhold CEOs' exit pay.

Among companies that have announced firings of top executives recently are Beazer Homes USA Inc (BZH.N), which said in February that it fired general counsel Kenneth Gary for cause, citing a "pattern of personal conduct which includes violations of company policies."

Sunrise Senior Living Inc (SRZ.N) in May said it had terminated the employment of then Chief Financial Officer Bradley Rush for cause. Rush has sued the company for breach of contract and defamation stemming from his termination.

In 2005, Boeing Co (BA.N) ousted Harry Stonecipher as CEO, saying he had shown poor judgment by having an affair with a female company executive. At the time, the company said it had "asked for and received" Stonecipher's resignation.

Whether it's termination or retirement, departing chiefs still can leave with plenty. In the case of O'Neal, the ex-Merrill chief is walking away with about $161.5 million in retained stock awards and benefits, as well as an office and an executive assistant for three years, according to the company.

Citigroup has not announced financial terms of Prince's departure, but he could leave with as much as $31 million in unvested stock, stock options and pension benefits, according to estimates by Hay Group.

In announcing that Prince would retire, Citigroup's release was full of accolades, with director and Alcoa Inc (AA.N) CEO Alain Belda saying that "Chuck has been an extraordinarily committed leader who took on many difficult issues that needed to be addressed and strengthened Citi's position for the future."

But Prince's own comments, in a somewhat unusual admission for a departing chief, went a lot further in taking responsibility for his company's woes.