CEOs who take the millions and run

Dane Miller, the CEO of medical-device maker Biomet (BMET, news, msgs), is about to get a raise of nearly 350%, or nearly $2 million a year. His pay in the first year of the deal will be a tidy $5 million.

Why the raise? Miller is stepping down as chief executive and cutting back to a 10-hour-a-week consulting role. To help with that work, he'll receive $100,000 a year for expenses, including an office and a secretary. Biomet will also provide Miller -- who with his wife owns about $230 million worth of Biomet stock -- with a cell phone, laptop computer, PDA and company car.

All this makes Miller part of a growing number of CEOs who are paid more in retirement than they were while steering their companies. The companies, for the most part, say the packages serve two main purposes: to reward the former execs for their contributions and to keep them from working for the competition.

But critics think it's just another example of corporate boards, which are supposed to monitor executive compensation on behalf of investors, being asleep at the switch. Why, asks Bob McCormick of Glass Lewis & Co., an investment research firm, wouldn't departing CEOs be willing to offer some free advice to the companies that already had paid them millions of dollars -- or in the case of Miller, tens of millions of dollars -- during their careers? "To give them such a huge incentive after they leave is outrageous," he says. A Biomet spokesman declined to comment.

Take the millions and run

CEO consulting arrangements, though, are becoming increasingly lucrative and commonplace. And at a time when companies are sending more jobs overseas in an attempt to cut costs, the packages are drawing plenty of criticism. While lower-level workers bear the brunt of outsourcing, says Sarah Anderson of the Institute for Policy Studies, "the guys at the top, as usual, have found a way to reap absurd rewards."

The consulting jobs typically come with guaranteed pay. So while CEOs had to at least hit performance targets during their regular working days -- and were even subject to being fired -- they face no such problems in retirement.

"This is the risk-free alternative to being the CEO," says Patrick McGurn, special counsel for Institutional Shareholder Services. "These arrangements transport many of these executives from full-time, at-risk, incentive-based jobs to part-time, low-risk, no-show hobbies. Nice work -- or lack thereof -- if you can get it."

Here's a look at some of the most lucrative consulting gigs landed by outgoing CEOs in the past several months, according to Michelle Leder at Footnoted.org.

• Outgoing Source Interlink Cos. (SORC, news, msgs) Chairman and CEO S. Leslie Flegel landed a 41% pay raise for his part-time consulting job with his company when he resigned earlier this month. He'll get $1 million a year in the three-year consulting gig, which could also reward him with up to $4 million in bonus pay. That's a nice increase over his 2005 salary and bonus of $710,683.

"What happens to the guy who worked 40 years in the mailroom? What does he get?," says Don Hodges, president of the Hodges Fund (HDPMX). "This is a case of a board not doing its job. The boards at companies like that should be fired."

And it's not as if Flegel was destined for hardship in retirement. Even without the consulting job, he got a $4.7 million severance package and a $900,000 bonus from Source Interlink, a company that sells and distributes DVDs, CDs, magazines and books. As of May 2005 (the latest numbers available) Flegel beneficially held 1.6 million shares, which at a recent stock price of $9 would be worth $14.4 million. As of the end of 2005 he had exercisable options valued by the company at $12.3 million. He also gets health insurance while consulting, and an office and a secretary for one year. A Source Interlink spokesman declined to comment.

• Joseph Luter III was chief executive at Smithfield Foods (SFD, news, msgs) starting in 1975. He agreed to retire last August. During his tenure, he accumulated a vast amount of wealth. Stock options and grants helped him get 4.7 million shares worth $127 million. In the last three years he collected $20.2 million in bonus. He had $19.3 million worth of exercisable options as of last summer. He's also scheduled to get a pension worth at least $430,000 per year.

You'd think all of this might be enough to live on in retirement. But Luter gets much more thanks to a one-year -- renewable -- $1 million consulting deal. That gives him a 17% increase over the $850,000 annual salary he received each of the past three years.

Luter's consulting gig isn't stingy with the perks, either. Besides use of the company aircraft, he'll get an office and a secretary, cash incentive awards, health-care coverage, a cell phone, a computer and a BlackBerry. For all this, he only has to "devote less than half of his available working time to the consulting services," says the company.

A Smithfield spokesman notes that Luter remains the company's chairman and points out that "since Mr. Luter assumed the position of chairman of the board in 1975, Smithfield Foods has delivered a 24% average annual compounded rate of return to investors."

• Outgoing Brown Shoe (BWS, news, msgs) finance chief Andrew Rosen landed a part-time consulting gig with the shoe company after he retired in October. He'll get a 60% raise for his new advisory role. But he only has to work a leisurely eight days a month. As a consultant for two years, he'll get $110,417 per month, or $1.325 million a year, a 60% increase over the $829,000 in salary and bonus he got in 2005.

"It's ridiculous how these guys just stay on the teat after they stop working," says Hodges.

Brown Shoe will also pick up expenses, pay a 2006 bonus, pay his medical and dental insurance, and cover his monthly dues at the St. Louis Club. What's more, his company will continue to credit his supplemental executive retirement plan as if he were an employee making $825,000 a year.

Rosen also gets a pension of roughly $250,000 per year. As of April this year he owned $5 million worth of stock and $2.4 million worth of unexercised options.

Douglas Koch, chief talent officer at Brown Shoe, said that during Rosen's tenure, "the company has experienced tremendous growth and Mr. Rosen's efforts helped to create significant shareholder value."

• Henry Blissenbach, former president and CEO of BioScrip (BIOS, news, msgs), started his "retirement" last June. He'll continue on in a one-year consulting job that will pay him $9,167 a day plus expenses. He gets the equivalent of his 2005 pay, or $550,000. But he only has to work five days a month, at most. On the way out the door, he collected $1.35 million in severance pay. The drug distribution company also agreed to pick up his family health insurance costs for two years. BioScrip declined to comment.

• Former First Data (FDC, news, msgs) Chairman and CEO Charles Fote left his job at the start of this year. But he continued collecting his $91,667 each month for six months as a consultant, even though he cut back to 20% of his old work schedule. Fote also got an office, an assistant and expenses. On the way out the door, he got restricted stock worth $7.5 million. He collected $7.9 million in long-term incentive payouts in 2003-2005.

First Data says Fote's consulting deal is reasonable in part because it prohibits the former CEO from working for competitors. The company also needed Fote's advice on a restructuring that included the spinoff of Western Union (WU, news, msgs), says First Data spokesman Colin Wheeler. "We think that the company's solid operating and financial performance in 2006 affirms the soundness of the board's oversight," says Wheeler.

• Former Michael's Stores chairman Charles Wyly, Jr. and former vice chairman Sam Wyly have perhaps the best deal. They'll get a total $6 million for the next two years. The main requirement: They can't work. "What's next?" asks McGurn. "Paying retired execs to play golf?"

The company, which recently went private, describes it as a "noncompete" payment, or money that assures the former executive doesn't work for a competitor.

Thanks in part to options and restricted stock grants, Charles Wyly held 4.78 million shares around the time of the Michael's Stores buyout, which were worth $210.7 million, and Sam Wyly held 4.1 million shares worth $180.8 million.

At the time of publication, Michael Brush did not own or control shares of companies mentioned in the column.