Pepsi gives departing exec a sweet deal…

February 15, 2012

Last week, PepsiCo, Inc. (PEP) served investors a “multi-year productivity plan” that will cost about $910 million in pre-tax charges over the next four years but hopefully lead to a refreshing turnaround for the brand, which has lagged behind not just Coke recently, but also Diet Coke in the cola wars. The plan was summarized in this 8-K, filed February 9, which also poured out the news that a controversial top executive will soon leave, but with his glass more than half full.

The executive, Massimo d—Amore, is the President of the PepsiCo Global Beverages Group. He’s leaving that post on February 29, 2012, but he agreed to provide services to the top dogs at Pepsi during a one-year transition period before he eventually retires on February 28, 2013.

Pepsi’s filing disclosed that during that time, d’Amore will receive “bi-weekly transition payments of $79,400,” a number that doesn’t sound that shocking until you actually whip out a calculator and discover that the company is paying the guy more than $2.06 million. He’s also going to get continued health benefits, possibly a bonus for 2011, ongoing credited service in Pepsi’s various retirement plans, and continued rights to exercise or cash in on some equity awards. And, significantly, in the Retirement Agreement attached to the 8-K, Pepsi tells d’Amore that:

“…your services during the Transition Period shall not exceed 20% of the average level of services you performed for the Company over the immediately preceding 36-month period measured from your Effective Date.”

Thus, if d’Amore was an 80-hour-a-week kind of guy, he’ll now have to put his nose to the grindstone for a grueling 16 hours a week to get his $2.06 million. But if he was a 50-hour-a-week kind of guy, the expectation would only be for 10 hours a week, leaving him plenty of time for whatever else he likes to do. And if he previously worked 40 hours a week – well – he gets the same $2.06 million for 8 hours a week – a thought that is simultaneously enviable and depressing.

According to several sources, d’Amore was not destined to win any popularity contests. This Advertising Age article described him as a “lightning rod for controversy,” noting that he was the force behind the costly and disastrous attempt to change Tropicana’s packaging (Pepsi reversed course less than two months later after sales fell 20%), and that his micro-managing style caused nearly a dozen of Pepsi’s top marketing executives to leave in 2009 after his “tight control over the brands… led to a chasm between those who agree with his views and those who don’t.” Another article from a different source last fall offered a scathing assessment of d’Amore’s contributions to Pepsi.

Regardless of whether Pepsi encouraged d’Amore to step aside or he chose to leave, he has to do little to get the money other than put in a few hours, not disclose company secrets, not disparage Pepsi or those who are affiliated with it, and so forth.

The company, on the other hand, plans to spend up to $600 million in new marketing campaigns and simultaneously cut 8,700 jobs. For the employees who are about to lose their jobs, their severance packages aren’t likely to be anywhere near as refreshing as d’Amore’s.

Image source: Tall glass of iced drink via Shutterstock

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