Retiring Lilly Research Exec Steven Paul Gets $2 Million in Severance [The Indianapolis Star]
From Indianapolis Star (IN) (November 20, 2009)
Nov. 20--The top research executive at Eli Lilly and Co. will receive a $2 million cash severance payment and be credited with extra years of service when he retires in February -- a move some compensation experts are calling unusual.
Dr. Steven Paul, who has overseen Lilly's laboratories since 2003, had planned to retire at the end of 2010 but agreed to retire 10 months early when the company found a successor sooner than expected, a Lilly spokesman said.
The cash severance package is designed to make up for compensation that Paul will lose by leaving earlier, said the spokesman, Mark Taylor. "He is losing out on compensation that he would have earned throughout 2010."
Last year, Paul made a salary of $1 million and a total compensation package of $6.25 million, making him one of Lilly's top five paid executives.
Paul also will receive an additional 10 years of service credit for purposes of his pension benefit, the company said. He "will be eligible for a full pension benefit, not reduced for early retirement," according to a Lilly securities filing Thursday.
According to Lilly's most recent proxy statement, Paul had been eligible to receive 10 years of additional service credit only if he remained employed by the company past age 60 or was involuntarily terminated before he turns 60. Paul, 59, joined Lilly in 1993.
The company said it gave Paul additional years of service credit because he had not expected to leave the company before he turned 60 in November 2010, which would have made him eligible for a full pension.
According to a Lilly proxy statement filed earlier this year, the present value of Dr. Paul's pension is $4.28 million.
Still, some compensation consultants questioned why Lilly would give Paul a multimillion-dollar cash severance, despite his earlier-than-expected retirement.
"If he's really retiring, and not being pushed out, why is the company paying him severance?" asked Brian Foley, a compensation expert in White Plains, N.Y.
Paul Hodgson, a pay expert at Corporate Library in Portland, Maine, said pensions should be earned, not artificially inflated.
Call Star reporter John Russell at (317) 444-6283.
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Posted: November 2009