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University's severance package for Goldin called unprecedented

It may have been the richest payout in history when measured in severance dollars per hours worked.

Compensation specialists laughed out loud yesterday, amused and astonished that Boston University's trustees had rescinded their offer to make former NASA administrator Daniel S. Goldin the BU president and had given him a $1.8 million severance package before he ever reported to work.

"This is a new wrinkle in the golden parachute," said Timothy K. Cutler, founding partner of the Boston law firm Cutler McLeod, who has represented clients on compensation issues. "It's a golden parachute when the plane never took off the ground."

"In my experience, it's without precedent," said James Fisher, president emeritus of Towson University in Maryland, who consults with academic boards on compensation packages for presidents and chancellors. "He was invited to the position, he accepted the position, and now they've changed their minds. And they're compensating him to the tune of $1.8 million.

"He won't cry all the way to the bank," Fisher said. "He'll laugh all the way to the bank."

Struggling to stack up the Goldin package against other executive payouts, those in the compensation field could find few if any cases with which to compare it. "I personally haven't heard of any situation like this one," said Benjamin Taylor, spokesman for Watson Wyatt Worldwide, a compensation and employee benefits consulting firm in Washington.

Typically, severance packages for high-level departures are grouped into familiar categories. There are golden parachutes for top executives when friction develops between a hired gun and his boss. Perhaps the most famous example was the $140 million payout to Walt Disney & Co. president Michael Ovitz, fired after 14 months by Disney's chief executive, Michael Eisner, in 1996. That package was equivalent to nearly 10 percent of Disney's earnings that year.

There are golden handshakes when the board and the leader of an organization mutually agree on the need for an exit, such as the $960,000 package given to William M. Bulger by the University of Massachusetts trustees in August. There are goodbye gifts for top managers whose services are no longer required, like the $250,000 check cut by the Red Sox for Grady Little. And there are more traditional severance packages, anywhere from four weeks up to two years' salary, for employees and managers let go when their company is paring back due to a slow economy or a merger.

None of these scenarios resembles the Goldin case. "It's an amazing situation," said Michael B. Keating, an attorney for the Boston law firm Foley Hoag who negotiated the Bulger package on behalf of the UMass trustees. "I've heard of plenty of cases when a president goes to a university and it doesn't work out. But to have it end before he's actually started the job is unprecedented. It's a complete puzzlement how the trustees of BU got themselves into this situation."

Rescinded offers are most common when a professional firm hires a law or business school graduate for a junior position and then is compelled by economic conditions to scale back. In such cases, those who had been extended offers are typically given compensation packages to offset their costs of not pursuing other opportunities.

For a top-level postition like Goldin's, other factors probably came into play, specialists said.

"I suspect some of this package was to make it palatable for him not to bring suit against the BU trustees," Keating said.

Daniel S. Goldin Daniel S. Goldin
Aram Chobanian Aram Chobanian (Courtesy BU)
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