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“It’s a best practice for companies to understand where they stand on the golden parachute issue, so they don’t get themselves boxed into making last-minute adjustments,” says Margaret Black, a managing director at Pearl Meyer & Partners, who co-authored a recent white paper on the votes with fellow managing director Dan Wetzel.
According to their research, which goes through October 31, median support for the mergers themselves was near-unanimous: roughly 99%. Where approval for the deal was less overwhelming, approval for the parachutes tended to be lower, too. And shareholders were more likely to abstain from the parachute votes than from the merger votes.
The parachute vote result partly reflects how well the board has conveyed the value of change-in-control payouts to shareholders, Wetzel says. “From a director’s standpoint, it’s ‘Are we spending an adequate amount of time communicating incentives effectively to shareholders?’” he explains.
According to Pearl Meyer & Partners, Coventry Health Care and Warner Chilcott disclosed the lowest support in parachute votes, with just 35% approving. (Coventry was acquired by Aetna, and Warner Chilcott was acquired by Actavis.)
When it comes to directors and parachute votes, says Pearl Meyer & Partners’ Black, “They should have some level of concern, but it probably shouldn’t be keeping them up at night.”