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Golden Hellos

Source: United Benefit Advisors (UBA)

The recent practice of using multimillion-dollar signing bonuses — known as “golden hellos” — to get CEO candidates to join corporations is drawing criticism, Businessweek reported.

The number of United States companies in the Russell 3000 Index and Canadian ones in the S&P/TSX 60 Index making upfront payments to executives has hit more than 70 this year, up from 41 in all of 2012, according to governance advisory firm GMI Ratings. Yet high-profile flameouts such as when J.C. Penney fired CEO Ron Johnson just 17 months after giving him a signing bonus of $52.7 million in shares to recruit him from Apple show that these payments can quickly lose their luster–at least for shareholders.

“Investors should be skeptical of golden hellos, which represent pay decoupled from performance and provide no retention incentives,” said Lucian Bebchuk, a Harvard Law professor who has studied CEO pay.