George W. Bush is currently hashing out what he will do, or won't do, to help the domestic steel industry. It's inevitable that whatever proposal he settles on will leave many feeling victimized, and indeed the Wall Street Journal is reporting today that Bush will not pursue a plan suggested by various ailing steel-makers to have the government pick up the "legacy costs" associated with the health-care benefits of legions of ex-steelworkers. But at least one former employee of a big steel company will remain unscathed by whatever happens: William Bricker, former CEO of Cleveland-based LTV Corp. Indeed, Bricker did so well for himself in his brief and profoundly unimpressive tenure as a Big Steel honcho that I am granting him the latest Moneybox Genius of Capitalism Award.
Bricker's achievement may seem like small potatoes compared to the last Genius of Capitalism recipient, Garry Winnick, but I hope you'll agree it's still pretty impressive. And while he hasn't gotten much national attention, his name is probably pretty familiar to many in Cleveland, where it's come up often in the Plain Dealer's extensive coverage of LTV's never-ending woes (which was a great help to me in putting together what follows).
The story begins in November 2000, when Bricker, then 68, took over as CEO of LTV following the resignation of Peter Kelley. Bricker had been on the company's board since 1982, a stretch that included the firm's lengthy bankruptcy reorganization that lasted from 1986 to 1993, and he was described by a board spokesman as being "intimately familiar" with the firm. Previously, Bricker had run Diamond Shamrock from 1976 to 1987, a period in which that company abandoned Cleveland for Dallas, so he wasn't exactly a local hero; before that he'd worked in the chemical business. Post-Diamond Shamrock, he played a role in some Dallas consulting firms.
It was clear that LTV had hit another very rough patch, with losses in the hundreds of millions, and faced grim conditions. Its shares were trading for around $1. Are you surprised that mere weeks later, in late December, LTV filed for Chapter 11 protection again?
Well, Bricker was, or so he said. It turns out that a couple of months later, LTV got approval to dispense about $11 million in "retention bonuses"—see this earlier column for an explanation of such bonuses—including $1 million to keep Bricker from leaving. Bricker had signed on to a one-year contract with a $700,000 annual salary (unchanged by the shift to bankruptcy), plus a $200,000 bonus just for taking the job. He'd only been on the job a few months; why did he need a $1 million bribe to stay on? Well, Bricker said the thing was that he hadn't realized how bad LTV's problems were until he'd actually taken the job. And seeing as how he didn't really need the work, he needed the extra incentive to stay.
All of that is run-of-the-mill CEO behavior. What makes Bricker a Genius of Capitalism is what he did after extorting his $1 million to stay put. He quit! Admittedly this probably wasn't too big a surprise since pretty much nobody was applauding the job he'd been doing as LTV careened through bankruptcy. So did he get to keep his "stay pay"? He did. The retention bonus was to be paid in three parts, one in June 2001, another in December 2001, and the final chunk in June 2002. Since he resigned in November 2001, he'd only collected the first third. But luckily for him, the terms of his deal allowed him to go ahead and snag the remaining $660,000 right before he resigned.
The salary, signing bonus, and retention bonus add up to a mere $2 million, chump change by CEO standards. But come on, you have to hand it to this guy. It's one thing to make good money while your shareholders and employees get creamed. It's something else to wrangle a seven-figure bonus for staying on to do the job you had already committed to do. But managing to do both of these things and then walk away from the whole train wreck, personally enriched? That's a Genius of Capitalism.
Since I expect that this occasional series won't end with today's entry, I've decided to go ahead and grant retroactive Genius of Capitalism Awards to Kenneth Lay and Al Dunlap, George Shaheen, and William Farley. The Lay/Dunlap column includes the Paul O'Neill comments that gave the Genius of Capitalism Award its name.