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The top six Cabela’s executives stand to collect bonuses from the takeover of their company. Chief Executive Tommy Millner and five colleagues who run the outdoor retailer are covered by what Wall Street calls “change-in-control” agreements as part of their employment contracts in the case of a company being bought out, as Cabela’s was Monday by Missouri-based rival Bass Pro Shops.
Executive severance pay agreements are ubiquitous in corporate America, part of the executive pay structure at every or nearly every publicly traded company, said Margaret Black, a managing director with the Los Angeles office of executive compensation consultant Pearl Meyer.
“It is a widespread practice,” Black said. “Without it, executives might resist a valid offer out of fear of losing their jobs.”
Also, Black said, in industries prone to frequent mergers and acquisitions, such as the computer and tech industries a few years back, companies had to offer competitive severance pay or they would not be able to attract good talent, which would be put off by the likelihood of losing it all amid the numerous active consolidations.
Black said severance pay is vetted and approved by directors at publicly traded companies—the shareholder-elected representatives who are charged with looking out for the interests of investors—the same way all other material affairs are.