Major Design Changes have Occurred in Executive Change-in-Control Arrangements According to a Recent Study by Meridian Compensation Partners

LAKE FOREST, Ill.--()--Meridian Compensation Partners, a leading executive compensation and corporate governance consulting firm, has found that an increasing percentage of large public companies are modifying the terms of their golden parachute severance arrangements in response to concerns raised by institutional shareholders and proxy advisors.

According to Don Kalfen, a partner at Meridian, “These modifications have resulted in a precipitous drop in the prevalence of excise tax gross-up provisions and, similarly, a sharp drop in the vesting of equity awards solely upon a change in control ('single-trigger vesting'). We project that within a few years excise tax gross-up provisions will virtually disappear from golden parachute severance arrangements. In the case of equity awards, single-trigger vesting has declined in prevalence in favor of vesting upon a qualifying termination of employment following a change in control (or 'double-trigger vesting').”

Change-in-control (CIC) protections remain common practice among public companies, with approximately 75% of companies providing some level of protection. While CEO severance levels have remained relatively constant at 3 times salary plus bonus, the median severance levels for other NEOs have dropped to 2 times salary plus bonus. Long a majority practice, single-trigger vesting of time-based equity awards is now a minority practice and will likely continue to decline in prevalence with only 33% of companies vesting stock options and restricted stock/restricted stock units upon a single trigger, down from 50% of companies in 2010. With regard to excise tax gross-ups, the Study found that only 35% of companies provide for excise tax gross-up payments to their CEOs, down from 60% in 2010 and 29% of companies provide for excise tax gross-up payments to their other NEOs, down from 57% in 2010.

Meridian’s 2014 Study of Executive Change-in-Control Arrangements reviewed change-in-control severance arrangements of 160 large U.S. companies covering named executive officers or NEOs. The companies subject to the Study represent a cross-section of S&P 500® companies.

For your copy of Meridian’s 2014 Study on Executive Change in Control Arrangements, please contact Donald Kalfen at dkalfen@meridiancp.com.

About Meridian Compensation Partners

Meridian Compensation Partners, LLC is a fully independent executive compensation consulting firm providing trusted counsel to Boards and Management at hundreds of large companies. We consult exclusively on executive and Board compensation matters, including their design, amounts and related corporate governance practices. Our dozens of consultants throughout the U.S. and in Canada have decades of experience in pay solutions that are responsive to shareholders, reflect good governance principles and align pay with performance. Visit us at www.meridiancp.com

Contacts

Meridian Compensation Partners, LLC
Donald Kalfen, (847) 235-3600
dkalfen@meridiancp.com
www.meridiancp.com

Release Summary

Meridian Compensation Partners has released its 2014 Executive Change in Control Survey finding significant changes in CIC design in recent years.

Contacts

Meridian Compensation Partners, LLC
Donald Kalfen, (847) 235-3600
dkalfen@meridiancp.com
www.meridiancp.com