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NEW YORK—March 6, 2014—Major institutional shareholders are driving key revisions to the design of severance payouts to key executives in the event of a merger or takeover, according to findings based upon proxy research reported in a recent Webcast from executive compensation consultancy Pearl Meyer & Partners (PM&P).
“In today’s performance-focused environment, companies face investor pressure to address change-in-control payouts to departing executives that are considered excessive and/or too easily triggered,” said Daniel M. Wetzel, Managing Director and head of PM&P’s Los Angeles office, who spoke on the February 12 program Ultramodern Golden Parachutes: Change-in-Control Pay in 2013/2014.
The trend is exemplified by a shift among the biggest U.S. companies’ away from gross-up provisions, which were once-common payments made to reimburse senior executives for excise taxes imposed on certain awards made upon a change-in-control (CIC). Among the Fortune 50 companies,* the prevalence of gross-ups declined from 41% to 14% between 2006 and the end of 2012, according to an ongoing PM&P analysis of golden parachute disclosures and Say on Golden Parachute votes since 2011.
“Such arrangements are clearly headed for extinction,” said Margaret H. Black, a PM&P Managing Director who also spoke on the program. “Five of the seven remaining Top 50 companies that still use gross-ups have announced their discontinuation.”
Other findings from Pearl Meyer & Partners’ proxy research discussed during the webcast include:
* The top 50 public companies as reported in the 2013 Fortune 500.
About Pearl Meyer & Partners
For 25 years, Pearl Meyer & Partners (www.pearlmeyer.com) has served as a trusted independent advisor to Boards and their senior management in the areas of compensation governance, strategy and program design. The firm provides comprehensive solutions to complex compensation challenges for multinational companies ranging from the Fortune 500 to not-for-profits as well as emerging high-growth companies. These organizations rely on Pearl Meyer & Partners to develop global programs that align rewards with long-term business goals to create value for all stakeholders: shareholders, executives, and employees. Pearl Meyer & Partners maintains U.S. offices in New York, Atlanta, Boston, Charlotte, Chicago, Houston, Los Angeles, San Francisco and San Jose, as well as an office in London.