ANALYSIS OF EXECUTIVE CHANGE
IN CONTROL ARRANGEMENTS AT
100 COMPANIES IN THE S&P
COMPOSITE 1500 INDEX
In recent years, stakeholders, regulators, and advisory groups have continued to advocate for more transparency and change with respect to executive compensation. One area of executive compensation that is often embattled with criticism is change in control provisions.
DOWNLOAD REPORT Alvarez & Marsal’s Compensation and Benefits Practice has partnered with ESGAUGE and is pleased to provide this latest edition of our study on change in control arrangements among 100 companies in the S&P Composite 1500 Index.
Two areas of executive compensation that are often embattled with criticism are benefits provided in connection with Non-Change in Control (“Non-CIC”) or Change in Control (“CIC”) Involuntary Terminations (collectively “Involuntary Terminations”). Typical Involuntary Terminations benefits include severance payments, partial or full accelerated vesting of equity awards, and enhanced retirement benefits. The tables below show the average value of CIC vs Non-CIC Involuntary Termination benefits for CEOs and CFOs by market capitalization.
The purpose of CIC arrangements is to ensure that executives evaluate every opportunity, including an acquisition, with an eye toward maximizing shareholder value without considering how such an event will affect their personal circumstances. By addressing CIC provisions in executive compensation packages, Boards can be assured that executives will be more likely to approach the intricacies of negotiation without the distraction of personal considerations. Explore common CIC benefits below:
Severance is typically defined as a multiple of base salary and bonus. The most common cash CIC severance multiple for CEOs is ≥2 and <3 times compensation.
Accelerated vesting of long-term incentives is a common CIC benefit but is most often provided only when the executive is terminated in connection with the CIC (“double-trigger vesting”), as opposed to being provided upon a CIC alone (“single-trigger vesting”).
Companies routinely provide additional CIC benefits to executives.
CIC benefits that are deemed excessive under the Golden Parachute rules can result in a 20% excise tax on certain payments. Companies choose to address potential excise tax in a variety of ways.
The purpose of Change In Control (CIC) arrangements is to ensure that executives evaluate every opportunity, including an acquisition, with an eye toward maximizing shareholder value without considering how such an event will affect their personal circumstances. By addressing CIC provisions in executive compensation packages, Boards can be assured that executives will be more likely to approach the intricacies of negotiation without the distraction of personal considerations. Explore common CIC benefits below:
Severance is typically defined as a multiple of base salary and bonus. The most common cash CIC severance multiple for CEOs is ≥2 and <3 times compensation.
Accelerated vesting of long-term incentives is a common CIC benefit but is most often provided only when the executive is terminated in connection with the CIC (“double-trigger vesting”), as opposed to being provided upon a CIC alone (“single-trigger vesting”).
Companies routinely provide additional CIC benefits to executives.
CIC benefits that are deemed excessive under the Golden Parachute rules can result in a 20% excise tax on certain payents. Companies choose to address potential excise tax in a variety of ways.
While CIC arrangements face increased scrutiny from regulators, shareholder activists, and others, additional strategic reasons exist for management and compensation committees to provide and benchmark executive CIC benefits.
S&P 1500 Composite companies with Market Capitalizations as of 1/1/2023 between approximately $273M and $1.7B. S&P 1500 Composite companies with Market Capitalizations as of 1/1/2023 between approximately $1.7B and $4.5B. S&P 1500 Composite companies with Market Capitalizations as of 1/1/2023 between approximately $4.5B and $15B. S&P 1500 Composite companies with Market Capitalizations as of 1/1/2023 greater than $15B.
S&P 1500 Composite companies with Market Capitalizations as of 1/1/2023 between approximately $273M and $1.7B.
S&P 1500 Composite companies with Market Capitalizations as of 1/1/2023 between approximately $1.7B and $4.5B.
S&P 1500 Composite companies with Market Capitalizations as of 1/1/2023 between approximately $4.5B and $15B.
S&P 1500 Composite companies with Market Capitalizations as of 1/1/2023 greater than $15B.
The Compensation and Benefits Practice of Alvarez & Marsal assists companies in designing compensation and benefits plans, evaluating and enhancing existing plans, benchmarking compensation, and reviewing programs for compliance with changing laws and regulations. We do so in a manner that manages risks associated with tax, financial, and regulatory burdens related to such plans. Through our services, we help companies lower costs, improve performance, boost the bottom line, and attract and retain key performers.
