Some executives give, but others hold tight

December 31, 2006|By Andrew Leckey | Andrew Leckey,Tribune media services

It is more blessed to give than to receive - which even goes for giant corporations and their executives. Unfortunately, not all embrace that message.

Drugmaker Pfizer Inc. adhered to the basic philosophy by recently raising its dividend to shareholders after its stock dropped when it curtailed development of a potentially blockbuster drug.

On the other hand, former executives of government-sponsored mortgage company Fannie Mae are refusing to give back bonus money they received as a result of improper accounting.

Pfizer boosted its dividend by 21 percent as a bonus to shareholders after it stopped work on cholesterol treatment torcetrapib because of safety worries. Its stock had lost nearly 11 percent of its market value in an initial reaction to the news, so it felt this was the least it could do.

Pfizer's first-quarter dividend was boosted to 29 cents a share from 24 cents a share, payable March 6 to shareholders of record on Feb. 9. The Pfizer board has also added the title of chairman of the board to Chief Executive Officer Jeffrey B. Kindler as a reassuring statement that it wasn't holding the torcetrapib disappointment against him.

But then, we always knew Pfizer had a great big heart: Former Chairman and CEO Henry A. "Hank" McKinnell will retire next year with a $200 million payout as his send-off for 36 years of loyal service. Some shareholders consider it excessive.

In the case of Fannie Mae, three former executives, including former CEO Franklin D. Raines, put a damper on the holiday season by saying they won't give their $115 million in previously received bonuses back to anyone. The executives were fired two years ago after regulators discovered numerous accounting rule violations at the firm.

Fannie Mae recently restated results that cut earnings as of mid-2004 by $6.3 billion. Besides the return of the bonuses, the Office of Federal Housing Enterprise Oversight is seeking fines against all three execs that could total more than $100 million for "improperly manipulating" earnings to maximize bonuses.

The government contention is that bonuses based on phony results should be considered invalid. Picky, picky.

The executives, through their lawyers, have responded that allegations against them are "a work of unsubstantiated fiction" and are giving every indication they'll put up a legal fight that means nobody gets that money back anytime soon.

On Wall Street, stock of Pfizer and Fannie Mae receive consensus analyst ratings a little better than "hold," according to Thomson Financial.

Andrew Leckey writes for Tribune Media Services.

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