Main Subject - Business

Wallace Malone is retiring as vice chairman from Wachovia Corporation with a sweet and juicy departure package worth at least $135 million. This amount probably will be increased (grossed up) so the poor fellow will not have to fret over paying any income tax on the $135. Incredible, even for doing a good job, though one arguably

According to USFDA, a combination product is one composed of any combination of a drug and device; biological product and device; drug and biological product

could make a moral case for such a payment. But what about those who fail?

What about the story from Walt Disney's Magic Kingdom and Michael Eisner, the former CEO who once encouraged the potential payment of a $140 million golden parachute for Michael Ovitz, his friend who lasted just 14 months as his deputy? Eisner himself wa

; or drug, device, and biological product and fixed dose combination would include two or more combinations of drug.

Examples of combination products may in

s forced out left last year with a package worth nearly $24 million excluding a $300,000 annuity for life. In fact, most severance packages of this nature also contain a dazzling array of other sweet benefits--everything from use of private corporate jets to lucrative consulting contracts, use of secretaries to office space for l

lude drug-coated devices, drugs packaged with delivery devices in medical kits, and drugs and devices packaged separately but intended to be used together.

ife, country club memberships to financial planning help. There are limitless goodies executives seem to enjoy in "forced retirement" at the expense of shareholders.

Ever-increasing severance packages granted to terminated or otherwise departing executives (which are negotiated into employment contracts upfront) are a part of th

here is enormous increase in the number of combination products entering the market in the recent years. Combination products have proven advantages but fixe

e growing perception that total compensatory reward is out of sync with performance, or lack thereof. After all, if it is immoral to punish large corporations (like Wal-Mart) for their financial success, it should be equally immoral to unduly reward the top executives of such corporations when they are terminated for poor perform

d dose combinations are still in the process of convincing regulatory authority on their advantages over the single ingredient formulations.

Combination pro

ance.

What about Stephen C. Hilbert, the former CEO of Conseco, who almost drove that company into bankruptcy but was given $47.1 million in severance for his efforts? Pity Carly Fiorina who left Hewlett-Packard with a tarnished reputation. Fortunately her exit package eased her pain; it was worth about $21 million. "This is not

ucts have become life saving products for the pharmaceutical companies who doesn’t have many innovative molecules in their product pipeline and have been inc

hing beyond the normal severance we give to senior executives," says HP company spokesman Mike Moeller. How sweet is that? Doug Ivester, former chairman of Coca-Cola, left under a similar dark cloud, but to bring in a some sunshine, his severance approached a sweet $120 million. Poor Jill Barad, former CEO of Mattel, departed wit

easingly used in the product life cycle management. Even the companies having product patents are trying to extend their product life cycle through the combi

h $55 million after being fired for her poor performance. Robert Annunziata left the CEO post of Global Crossing in just one year with $15.9 million. L. Dennis Kozlowski of Tyco and New Hampshire infamy was on schedule to get as much as $117 million before he was indicted and convicted for corporate wrongdoing. Incredibly, Tyco a

nation products and maximize the revenues. But the companies involved in this practice are overlooking that they are burdening the patients both economically

greed to pay a severance package of $44.8 million to Mark Swartz, its former chief financial officer, even while he was under investigation by a grand jury in New York that later indicted him on criminal charges (Drury, Jim, "It Pays to Fail," Sept. 16, 2002, www.chiefexecutive.net). The agreement, by the way, was signed by two m

and physically. They need to rightly judge the benefits of the combination products and they have to even look at the risks involved when combining the produ

embers of Tyco's compensation committee, one of whom was Stephen W. Foss, former chairman of the N.H. Port Authority, who later ran into his own serious problems of wrongdoing (Feingold, Jeff, "In the Wrong Place at the Wrong Time," N.H. Business Review, Oct. 17, 2002, 14b).

Franklin Raines was forced out as Fannie Mae's chief e

ts. Some of the combination products were well accepted by physicians while others suffered. Companies involved in development of combination products are fi

ecutive after only five years but will receive a pension of $1.3 million a year for life for his poor performance, though the payment is being disputed. Nice pension for just five years of work. N.Y. Stock Exchange chairman Richard Grasso "resigned" on Sept. 17, 2005, at an emergency meeting of the NYSE Board, which voted for his

ding difficulty in defining their combination products and facing various challenges from selecting a combination to marketing it.

Following aspects would a

ouster. The forced resignation came only three weeks after the same board disclosed their earlier pay out of $140 million in deferred compensation and retirement benefits to Grasso, at that time praising him for his “outstanding leadership.”

And the beat goes on, with other examples of corporate scoundrels slurping at the troug

dd to the challenges in developing combination products:

Which markets to tap where the combination products can do fairly well?
Which combination prod

h, examples too numerous to cite in this column. These episodes seem to be classic examples of how powerful people can bend or rewrite the rules to fit the games they play and somehow rationalize it.

No one is arguing that traditional and competitive severance packages are not important or necessary, but many of the excessive on

cts are meaningful and rational?
Which therapeutic categories to select?
Which Combinations can address unmet needs of the patients?
Do combin

es are incomprehensibly and ironically triggered when executives are getting fired for poor performance. These kinds of payments reflect a callous disregard for those in the office cubicles or on the factory floors, most of whom are simply shown the door when they get fired. That others get fired and get enormous payoffs has beco

tions increase the patient compliance?
What would be the developing cost?
How to tackle the risks encountered during combination product developmen

me a hot topic of examination, particularly during the past few years which some have called the period of "Corporate Greed." Indeed, such juicy packages often indicate that a particular board of directors is not overseeing the corporate cash register or company management close enough, nor looking out for the shareholders, notwi

t?

As combination products don't fit into the traditional categories of drugs, medical devices, or biological products, the USFDA is in the process of devel

thstanding the Sarbanes-Oxley Act, which emerged in 2002 as a result of the public's outcry over corporate scandals.

Now, if executives are paid more for high performance because their compensation is supposedly tied to performance, then logic dictates they should get less in the way of severance for poor performance. Why should

ping new procedures for reviewing their safety, efficacy and quality.

Professional from academic institutions, pharmaceutical industries, health care indust

a top executive knock himself out to perform well when he or she may end up with more money by simply working toward failure? Why not manipulate circumstances so you can be rewarded for failure? It is not at all unusual for some executives to move from company to company, leaving each "to pursue personal interests," but with gen

y and representatives from various regulatory agencies are working out to design the regulatory requirements for manufacture and sale of combination products

erous severance for their serial failure. Eventually, if they fail enough times, they can end up with a nice chunk of cash which then can be annuitized for a comfortable retirement in Sedona, Palm Beach or Telluride--or perhaps all three.

Excess severance payments were just one of the many symptoms of the corporate accounting sc

.

As there is an increasing trend of the combination products companies manufacturing such products should be able to tackle the problems involved in the de

andals that occurred between 2001 and 2003. Many view Enron as the poster child for this period, though technically the jury is still out (pardon the pun). If so, it is noteworthy that only three people, James Chanos, Jonathon Weil and Bethany Mclean, spoke up against Enron early on. Perhaps the real question to ponder is, where

elopment. They need to be wiser in analyzing the market trends and the regulatory requirements.

Companies that provide selfless information through particip

were the others? And where are they now with respect to execessive severance payments--for rarely have so few been so highly paid for doing so little for their companies, shareholders and employees.

"If ethics are poor at the top, that behavior is copied down through the organization." --Robert Noyce, inventor of the silicon chi

tion in industry events and feedback to regulatory authorities would be able to face the challenges and will be successful in developing combination products

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