Pay to Play, er, Go Away

Much is said and written about how much companies should pay good executives to stay. Here's how much one company paid a bad executive to go away.

As noted last week, InfoGroup, a keeper of mailing lists, sales leads, and other databases, agreed to part ways with its founder, Vinod Gupta.

The separation was in no small part to settle shareholder lawsuits over the way he ran the firm. (A pair of investment firms had accused Gupta of having InfoGroup provide him with homes, corporate jets, and luxury cars, and to lease these perks from companies wholly owned by ... yep, Vinod Gupta.)

Just how eager were the irritated investors to get rid of Gupta? As Footnoted.org blogger Michelle Leder notes today, plenty eager. InfoGroup agreed to pay its erstwhile executive $10 million in severance, which more than offsets the $9 million that Gupta had already agreed to pay back to the company.

His true haul, however, is more than the $1 million difference in those figures.

Under the terms of his separation agreement, Gupta will receive his $10 million in two lump sums: Half right away, the rest at the end of June 2009.

But he'll have to pay back the company much more slowly. Under a separate stipulation of settlement, Gupta will have to pay InfoGroup $2.2 million right away, and the rest spread over the next four years.

Since InfoGroup will pay Gupta much faster than he pays the company, he will benefit from what amount to interest-free short-term loans of as much as $5.6 million from InfoGroup.

But wait! There's more!

Gupta's agreement to quit his company greatly benefited his personal investment portfolio: According to the company's most recent proxy statement, Gupta owns about 40 percent of the company's stock; on the day InfoGroup announced his departure, the shares jumped 19 percent.

Roughly speaking, then, his own ouster gave Gupta a paper gain of $21.9 million in a single day. And the stock has continued to rise since then. His stock in the company has increased in value by more than $24.5 million.

Maybe he should have fired himself sooner.

by Mark Stein