Did Buffett Overpay for H.J. Heinz Company (HNZ)’s CEO?

Stocks opened nicely higher this morning, with the S&P 500 and the narrower, price-weighted Dow Jones Industrial Average up 0.8% each as of 10:05 a.m. EST. That has pushed the Dow to a new all-time high of 14,239 points.

A very rich sauce
On Valentine’s Day, when Berkshire Hathaway announced it was tying the knot with H.J. Heinz Company (NYSE:HNZ) , I asked whether Warren Buffett was overpaying for the maker of the iconic ketchup brand. My answer was no — he was getting value for his dollar. However, according to a filing made by H.J. Heinz Company (NYSE:HNZ) with the SEC yesterday, if Berkshire and 3G Capital fire H.J. Heinz Company (NYSE:HNZ) CEO William R. Johnson, he is entitled to receive a “golden parachute” payment worth $56 million. Should he walk out the door of his own volition, however, he will receive a mere $40 million. Every worker should wish for such a well-structured contract — “Heads, I win; tails, you lose.”

Is Mr. Johnson worth this sort of largesse? According to Bloomberg: “Johnson … has made about 40 acquisitions, helping expand the company into emerging markets. He streamlined the brand portfolio, boosted spending on marketing and ratcheted up innovation, including Dip & Squeeze ketchup packs.”

All well and good, but how have long-term shareholders fared as a result? The following chart shows H.J. Heinz Company (NYSE:HNZ)’s performance (on a total-return basis) since April 30, 1998 — the date on which Johnson assumed the position of president and CEO — relative to that of the S&P 500: