Meridian Compensation Partners Releases New Study on Executive Severance Arrangements

LAKE FOREST, Ill.--()--Meridian Compensation Partners, a leading executive compensation and corporate governance consulting firm, has completed a comprehensive study on executive severance arrangements (not related to a change in control) at a cross-section of S&P 500® companies. Executive severance arrangements remain a widespread practice among these companies. “While the value of cash severance has declined in recent years, we still see a majority of companies providing severance protection to their executives” said Donald Kalfen, a partner with Meridian. Key findings of the Study include the following:

  • 69% of Study companies disclose covering executive officers under either an executive-only severance arrangement (62% of Study companies) or a broad-based severance arrangement (7% of Study companies).
  • While all companies with severance arrangements pay cash severance upon a termination without “cause,” only 50% pay cash severance upon a voluntary termination for “good reason.”
  • Cash severance levels have declined in recent years:
    • For CEOs, 3× cash severance multiple declined in favor of 2× cash severance multiple, with 2× becoming the majority practice (61% of companies up from 48% in 2011).
    • For other executive officers, the prevalence of 2× and 1.5× cash severance multiples declined in favor of 1× severance multiple (37% of companies up from 30% in 2011).
  • In addition to cash severance, severance arrangements often provide other benefits to executive officers (not considering those related to long-term incentive awards):
    • 63% pay a “stub year” bonus (typically pro rata) for the year in which an executive officer incurs a qualifying termination of employment.
    • 75% continue health care benefits, with 24 months the most typical practice.
    • 37% provide outplacement services.
  • Upon an executive officer’s involuntary termination without cause or termination for good reason, stock options and performance cash awards are more likely to be forfeited than vested, while restricted stock/RSUs and performance shares are more likely to vest in whole or in part than be forfeited.

For a copy of the Meridian’s 2015 Study on Executive Severance Arrangements, please contact Donald Kalfen.

About Meridian Compensation Partners

Meridian Compensation Partners, LLC is an 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

Study on executive severance plans finds decline in severance levels

Contacts

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