The Changing Landscape of Golden Parachutes in a Say-on-Pay World

Source: Cody Nelson, Towers Watson, Executive Compensation Bulletin, May 28, 2015

From the summary:
So-called golden parachute payments — severance paid to executives affected by a change in control (CIC) — have come under renewed scrutiny at the same time as the pace of mergers and acquisitions (M&A) has surged over the past few years. Indeed, it’s not uncommon to see headlines focusing on outgoing CEOs’ golden parachute amounts following merger announcements. (For more on recent M&A trends, see “Key Executive Compensation Issues to Address in M&A Due Diligence,” Executive Pay Matters, February 25, 2015.)

In the 2011 golden parachute report prepared by Towers Watson’s Executive Compensation Resources (ECR) unit, we wondered how long golden parachutes would be with us, given the sharper focus on these arrangements with the advent of say-on-pay and say-on-parachute votes. (See “Golden Parachutes: Still With Us, But for How Long?” Executive Compensation Bulletin, November 1, 2011, for our last report.) But, while golden parachutes clearly have remained a key component of the executive pay landscape, many features have changed over the past several years to make these arrangements more shareholder-friendly. To provide an overview of current parachute practices, ECR reviewed CIC severance provisions at Fortune 500 companies to identify common features and recent trends and changes in these programs. Since companies that don’t offer CIC benefits or enhanced severance for an involuntary termination after a change in control were excluded from our analysis, our report focuses on the 340 Fortune 500 companies that offer severance upon a CIC event. …