Talking Points Agreements and Surveys
Tim Sparks is President of Compensia
1. Employment/Severance/Change of Control Agreements
- Are employment/severance agreements necessary?
- Dont be a hostage to existing agreements
- Example just because executive agreement provides for full vesting upon termination without cause new grants can be excluded
- Example understand cost/consequences of awarding full value shares (vs. options) where executives have agreements providing for full acceleration on termination/change of control
- Compensation Committees must do their homework Cendant/Disney
- Selected elements of employment agreements
- Auto-renewal provisions
- Definition of Cause
- Selected elements of severance agreements
- Triggers
- Treatment of variable pay
- Treatment of equity
- Other benefits
- SERPS additional service credits
- Health & welfare benefits medical, life insurance
- Office/Administrative support
- Consulting agreements
- Selected elements of change of control agreements
- Triggers single or double
- Are they the same?
- Good reason?
- Golden parachute excise tax
- Assessing the data
2. Surveys Input
- Looking at the components of pay separately skews the analysis
- Example Change of control data companies that do not accelerate vesting are likely to pay higher cash and visa versa
- Excluding the zeroes
- Example - doing a peer group analysis and discovering that a minority of companies provide change of control protection and then targeting against the median of those companies
- Omitting data
- Example ignoring the CEOs SERP when assessing base, bonus and long-term pay
- Using average instead of median and having the outlier skew the data
- Cherry picking companies and titles
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