Today, Here Tomorrow
Many Retired CEOs Retain Offices at Firms They Led; To
Critics, It Is a Costly Favor
By Joann S. Lublin
The Wall Street Journal
Monday, January 22, 2007
Larry Kellner, chief executive of Continential Airlines
Inc., wanted to discuss his industry's consolidation with an
expert. So one day last month, he rode an elevator up 23
floors to see his predecessor, Gordon M. Bethune.
In light of US Airways Group Inc.'s hostile bid for Delta
Air Lines Inc., "maybe you should get your defenses ready,"
Mr. Bethune says he urged Mr. Kellner. Through a
spokeswoman, Mr. Kellner declined to comment on the
conversation but said he and Mr. Bethune "continue to enjoy
a close personal friendship."
The practice of companies offering former CEOs the courtesy
of an office and assistant -- sometimes for life -- is
longstanding, widespread and occasionally declined. More
commonly these days, chief executives head for the golf
course after retirement, never setting foot in their old
office again. A surprising number, however, regularly stay
on at headquarters.
Procter & Gamble Co. houses three retired CEOs at its
Cincinnati headquarters. A.G. Lafley, the current chief,
seeks counsel from at least one of them every quarter. P&G
pays for an office elsewhere for a fourth former leader,
Durk Jager, who left under less than happy circumstances in
June 2000, just 17 months after taking the top job.
Defusing a potentially volatile situation, Mr. Jager turned
down P&G's offer of headquarters space, according to a
Lee R. Raymond still occupies the third-floor corner office
he used before stepping down as CEO and board member of
Exxon Mobil Corp. at the end of 2005. Mr. Raymond's
successor as CEO, Rex Tillerson, occupies another corner
office on the same floor of its Irving, Texas,
headquarters. Mr. Raymond was paid $1 million last year as
Other businesses providing headquarters offices to one or
more retired CEOs include Intel Corp., DuPont Co. and
International Business Machines Corp. Edgar S. Woolard, a
retired DuPont chief executive, began to pay for his
headquarters office in January 2005 after the five-year
retirement perk ended.
Elmer Winter, 94 years old, still shows up most weekdays at
Manpower Inc., the temporary-help concern he co-founded in
1948. He runs a family foundation from Manpower's Milwaukee
offices. He addressed U.S. employees at a conference last
February, blessing a new global brand. "It was important to
have his seal of approval," a Manpower spokeswoman explains.
Proponents say free office space for retired CEOs gives
executives easy access to predecessors' expertise and
institutional memory. But critics claim the perquisite
wastes investors' money. Exxon's latest proxy statement
says Mr. Raymond's office and administrative assistant cost
about $200,000 a year. The Continental spokeswoman declines
to discuss the cost of Mr. Bethune's space.
"There is not a departing CEO of a public company who cannot
afford his own office space and support staff," contends
Nell Minow, editor of the Corporate Library, a
corporate-governance research firm in Portland, Me.
No one tracks how many CEOs get retirement offices, which
typically are guaranteed by their contracts. Tough new
pay-disclosure rules that take effect this year may shed
more light on the prevalence of the perk when it's promised
to recently retired chief executives.
Staying on after their time at the top is over, these lions
in winter interact with current management and staff in ways
as varied as the personalities and the companies involved.
Some CEO candidates aren't too pleased to learn their
retired predecessor will hang around at a headquarters
office once they arrive, say executive recruiters. They
would prefer "to be able to perform without having the
former CEO look over their shoulder and be a physical
presence," says Gerard Roche, a leading CEO hunter and
senior chairman of recruiters Heidrick & Struggles
International Inc. In a few instances, he adds, the
arrangement proves awkward and the new leader persuades the
board to move the elder corporate statesman to a different
The disparate experiences of retired CEOs who stick around
are illustrated by two retired CEOs named Gordon.
Mr. Bethune, 65, relinquished his 10-year command of
Continental in December 2004. The former mechanic is
revered by many Continental workers for pulling the airline
from the brink of bankruptcy in the mid 1990s, improving its
image and mending union relations.
Rank-and-file employees regularly greet Mr. Bethune by name
when he strides through the lobby of Continental's Houston
headquarters three days a week. Under his retirement
agreement, Continental guaranteed him an office and
secretarial assistance for a decade. Mr. Bethune requested
headquarters space "because it's close to my house." His
office, Continental's only presence on the building's 42nd
floor, is a third smaller than his 19th-floor perch as CEO.
Mr. Bethune remains an important industry player. He became
chairman of Aloha Airgroup Inc., parent of Aloha Airlines,
last August. And, shortly after his chat last month with
Mr. Kellner, he was hired as an adviser by creditors at
Delta, which is operating under bankruptcy-court protection.
Mr. Kellner visits, calls or emails Mr. Bethune an average
of once a month. The Continental chief occasionally asks
Mr. Bethune how he would have handled a thorny
labor-relations issue and alerts him about key corporate
announcements. But Mr. Bethune says Mr. Kellner never
mentioned Continental's exploratory talks with UAL Corp.
about a possible business combination.
Mr. Bethune avoids popping into his successor's office
uninvited. He declined Mr. Kellner's offer to retain his
CEO parking space, taking the adjacent spot instead. "I
wanted employees to see that he was in charge," Mr. Bethune
During his frequent lunches with other Continental
executives, Mr. Bethune says, "I make it a point to be
supportive of [Mr. Kellner]." When flight-crew members and
airport agents grumbled to him about pay cuts won by Mr.
Kellner, Mr. Bethune replied, "If I were here, I'd do it."
By contrast, Gordon Heffern draws little notice inside
KeyCorp's Cleveland headquarters. The 82-year-old retiree
led Society Corp., a KeyCorp predecessor, from 1983 to
1987. The financial-services concern provides offices to
Mr. Heffern and another former CEO.
Mr. Heffern, who still is involved with local charities,
visits his 10th-floor office once a week when he's in town.
(He lives in Florida about half the year.) "I love my
location," he says. "I'm out of the mainstream all by
myself. But I'm right next to the executive dining room and
right next to the men's room."
KeyCorp continues to pay Mr. Heffern about $25,000 a year to
advise CEO Henry L. Meyer III. But the company's top brass
pay him little heed. Messrs. Heffern and Meyer meet for
lunch twice a year. Mr. Heffern believes Mr. Meyer isn't
very interested in his advice -- and understands why. "I
don't think I have any special wisdom to offer," the retired
executive concedes. A KeyCorp spokesman agrees, saying
"there's no real business content" to the discussions.
Through another spokesman, Mr. Meyer says he values time
spent with Mr. Heffern because "he's a friend and great
source of insights" about everything from local philanthropy
to employee volunteerism. At a holiday party for about 100
retirees last month, Mr. Meyer asked Mr. Heffern to say a
few words. He described how he identified Mr. Meyer as a
rising star 30 years ago and persuaded him to pursue a
master's degree from Harvard Business school. "That was a
good decision, wasn't it?" Mr. Heffern asked the applauding
Mr. Meyer gave a thumbs up. The gesture "made me feel very
good," Mr. Heffern says.
Write to Joann S. Lublin