Equilar examined change-in-control arrangements among Fortune 100 companies for fiscal years 2008 and 2010. Key Findings:
Change-in-Control Cash Multiples Decrease for CEOs:
The prevalence of 3x salary multipliers among Fortune 100 CEOs decreased from 65.9% in 2008 to 44.2% in 2010, while the prevalence of 2x salary multipliers rose from 18.2% to 34.9%. Similarly, the prevalence of 3x bonus multipliers decreased from 65.9% in 2008 to 44.2% in 2010, while that of 2x bonus multipliers rose from 15.9% to 32.6%.Over 40% of Fortune 100 Executives Receive Cash Payments upon a Change-in-Control Termination:
In 2010, 45.3% of CEOs included in the study had cash change-in-control payment arrangements in place, while 41.2% of other NEOs had such agreements.Most Common Multiplier Higher for CEOs Compared to Other NEOs:
The most prevalent salary and bonus multiplier was 3x for CEOs and 2x for other NEOs.Majority of Change-in-Control Payments Require “Double-Trigger” Termination Scenario:
97.7% of companies with cash payments upon a termination related to a change-in-control required a double trigger, while the remaining 2.3% required a modified trigger.Target Bonus is the Most Prevalent Bonus Definition Used in F100 Severance Formulas:
50.8% of all change-in-control cash payments used target short-term incentives to calculate the bonus portion of the severance amount.
Equilar Study: Change-in-control Cash Severance Analysis. Conclusion: Active investors are having some minor impact. For a more radical approach that I endorse, see USPX Shareowner Guidelines for Say-on-Pay Voting.
The shakedown of corporate coffers continues. What are the institutional investors doing about it? Instead of “Occupy Wall Street” we should have “Occupy Fidelity Investments” and “Occupy CalPERS”.
Those who want to do further research in this area may want to look at ISS FAQs at http://www.issgovernance.com/policy/2011/USCompensationFAQ