Metra didn’t have to pay outgoing CEO any severance, experts say
BY ROSALIND ROSSI Transportation Reporter firstname.lastname@example.org June 24, 2013 9:46PM
Metra CEO Alex Clifford talks about station closures for the NATO Summit. | File Photo by Rich Hein~Sun-Times
Updated: July 26, 2013 6:38AM
In announcing a severance package that could reap former Metra CEO Alex Clifford $750,000 over the next 26 months, even Metra’s Board chair conceded the deal was “generous.”
Turns out, it was also legally unnecessary, experts say.
The original employment agreement of Clifford, who resigned Friday, clearly states that he is not entitled to a severance package if he resigns, experts said Monday.
“Because he resigned, he is technically not entitled to severance,’’ said Thomas Lys, professor of accounting information and management at Northwestern University’s Kellogg School of Management.
And, Lys noted, the package includes “no real incentive’’ for Clifford to work for the next 26 months, because if he is unemployed for the last 12 months of that period, he can get what Metra Board Chairman Brad O’Halloran described as $307,390. That’s a 22 percent pay hike over the $252,500 annual salary Clifford received when he walked in Metra’s door as CEO in February 2011.
The severance package also includes $442,237 covering: salary for the nearly eight months left on Clifford’s contract; nearly $138,000 for the six months after that; $35,243 in accrued vacation pay; $21,971 in accrued sick time, as well as other benefits.
In essence, Lys said after being shown a copy of Clifford’s original contract and separation agreement, “They [Board members] were willing to pay up to three-quarters of a million to get that separation. ... The point is, why did Metra agree to this deal?”
State Rep. Deborah Mell, chairman of the Illinois House Transit Committee, said Monday she planned to talk to other committee members to determine if they should hold a hearing to determine why taxpayers are footing the bill for a “huge” severance they are not legally required to bankroll.
“Why are you paying a severance when, according to the contract, you don’t have to?” asked the Chicago Democrat.
“I think for an agency that’s already kind of cash-strapped, and they have major infrastructure problems and they need their stations to be updated, the last thing we need to be doing is having these huge payouts and turnover like this,’’ Mell said.
Andy Shaw of the Better Government Association said Metra’s Board “owes the public an explanation.”
Said Shaw: “I think it’s outrageous for Metra to use tax dollars and transit revenue on an excessive ‘golden parachute’ for an employee who, according to his own hiring agreement, isn’t entitled to any severance pay if he resigns.
“It’s a slap in the face [to] Metra riders who’ve been paying higher fares.’’
In explaining the deal Friday, Metra’s chairman announced that there were “differences of opinion” on how Metra should move forward and “who we need leading this organization.’’
“After lengthy discussions with Mr. Clifford, he has agreed to tender his resignation,’’ O’Halloran said.
The “generous’’ nature of the severance reflected “the recognition that Clifford uprooted his family” from California to come to Metra more than two years ago, O’Halloran said. He did not mention that Clifford was paid a one-time relocation fee of $25,000 at that time.
His new deal allows him to be reimbursed for up to $78,000 in moving expenses, as well as a one-year payment of up to $307,390 in the “unlikely event” that Clifford does not find a more lucrative job, starting about 14 months from now, O’Halloran said. The amount covers the difference between what Clifford would have received at Metra and any new lesser salary, O’Halloran said. However, experts said it also allows Clifford to be paid $307,390 if he chooses not to work for the last 12 months of the 26-month deal.
Contacted by email Monday, Clifford said he did not currently have a job lined up but he “was personally insulted by any suggestion that I would deliberately try to stay unemployed to collect the final 12 months of pay.”
He said he was “wide open to considering opportunities in both the public and private sector nationwide.’’
Clifford, a former executive with the Los Angeles Metropolitan Transportation Authority, said he started mowing lawns when he was 11 years old and “I have worked every day since then.”
Metra Board member Arlene Mulder said Monday she did not know when she approved Clifford’s severance package that his contract did not entitle him to a severance if he resigned. Asked if that could have made a difference in her vote, she said, “every piece of information makes a difference,’’ but “I can’t tell you” if it would have changed her vote.
Mulder said there was “a lot of discussion’’ for three months about the deal and “after some number of meetings, this was the best agreement that was able to be established.’’ It was recommended by the Board’s legal counsel and other board members, she said, although since her vote, “I’ve had many people ask me about it. I really can’t share all the information that might make it clear.”
Kellogg’s Lys said the board and Clifford may have agreed on an “amicable separation” in which Clifford would resign rather than be let go in exchange for a severance package. However, Lys said, “It seems like a lot of money to me. There’s more to the story that you haven’t uncovered.’’
The deal also includes a separate payment of up to $75,000 to the attorney who negotiated the severance deal for Clifford, identified by one board member as attorney Michael Shakman.