04/02/2015 11:56 EDT

CIBC's McCaughey And Nesbitt Keep Getting Paid After Retirement, To The Tune Of $25 Million

What’s better than retiring?

Retiring, and still collecting your paycheque.

That’s the arrangement that former CIBC chief executive Gerry McCaughey and former chief operating officer Richard Nesbitt have with their employer, and between the two of them, they will collect $25.2 million in post-retirement pay.

McCaughey left his job on Sept. 15, 2014, but will continue to be paid as the bank’s CEO until April 30, 2016. In that time, he will have earned $16.7 million.

That’s despite the fact CIBC is already paying a new CEO, Victor Dodig, who earned $7.1 million in 2014. And he’ll likely earn much more this year, as he only became CEO in the last quarter of last year.

COO Richard Nesbitt also left on Sept. 15 of last year, but he will continue to be paid until Oct. 31, 2015, and in that time he will have made $8.5 million.

Not bad for sitting on a private beach in St. Kitts or working two hours a week on the board of some Bay Street company, or whatever these guys are doing these days.

CIBC does have an explanation. Essentially, McCaughey and Nesbitt didn’t actually “retire.” McCaughey's offical retirement date is April, 2016. It’s just that CIBC found a replacement a little early, and if you’ve got the right guy, well, you better hire him quick.

A similar arrangement was put in place for COO Nesbitt, and a replacement for him appeared a year early as well.

All this was published in CIBC’s proxy circular last month, but no one much noticed until the Globe and Mail picked up on it earlier this week. From the CIBC document:

On April 24, 2014, CIBC announced that Mr. McCaughey would be retiring as CEO effective April 30, 2016. CIBC reached an arrangement with Mr. McCaughey that secured a period of up to two years of continuing leadership from him should it be required for an orderly transition while providing for the potential of an earlier retirement date should a successor for Mr. McCaughey be identified and ready to assume leadership of CIBC before that time.

On July 31, 2014, CIBC announced the appointment of Mr. Dodig as CEO effective September 15, 2014. Given Mr. Dodig’s deep knowledge of CIBC and the Board’s confidence in his leadership, the Board chose to accelerate Mr. McCaughey’s retirement, in accordance with the terms of his arrangement….

According to the Globe and Mail, even some people on Bay Street see something inappropriate in this arrangement.

“This is very different. This can raise outrage,” York University prof and corporate governance adviser Richard Leblanc told the paper. “It sends the wrong signal to the rank and file.”

Concordia University corporate governance chair Claude Magnan said it was normal for exiting CEOs to get a consulting contract, but this arrangement “raises more questions than answers. … When you pay someone millions of dollars, you expect them to perform.”

But labour lawyer Jane Millburn told the paper the bank may have had no choice other than to pay the two execs, if they had in fact decided to accelerate the pair’s retirement ahead of schedule.

“The law states that where an employer wishes to exit the employee earlier [than the given retirement date] … it has the same effect as a termination without cause,” she said.

Within the industry, McCaughey was not considered overpaid. In a 2013 survey, Bloomberg Markets ranked him as "underpaid," relative to the bank's performance:

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