The Washington Post tells us that Marsha J. Evans of the American Red Cross received a severance of about $780,000 and offers some additional details of the conflicts with the ARC board that brought her downfall. We have already seen criticism of the way the board handled the departure, starting severance negotiations even before the full board had voted for it.
The perspective on this is that according to the IRS Form 990 for the ARC, Marsha Evans received an annual salary of $450,000 a year. The ARC is an organization in the $2 to 4 billion range. The web site of HR consultants Lee Hecht Harrison reports on a study of corporate CEO severance, indicating that CEOs at large corporations typically receive median severance of 24 months of salary with health and dental benefits continuation throughout the severance period.
Knowing recent history at the ARC (the previous CED was also fired), any incoming CEO would certainly have insisted on a severance package before joining the organization, and such pre-employment agreements are not considered by the IRS to be subject to excess benefit review, since the prospective CEO is not considered to be a disqualified insider before hire.
Because of its size, the financial impact of this continued CEO turnover on the Red Cross is negligible—it is the management impact that is significant. However, many smaller organizations will not be able to afford this kind of executive transition, which is not a very comforting consideration for all the charities with baby boomer CEOs approaching retirement.
Just a name coincidence, but if you want to see a corporate severance agreement, try this one for Nancy Evans of iVillage (not related, to my knowledge, to Marsha Evans), starting on page 101 or so (Exhibit 10.3) of this 10-Q. This is a relatively modest settlement of 12 months of salary, or $325,000.
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