Talking Points – Agreements and Surveys

 Tim Sparks is President of Compensia

 1. Employment/Severance/Change of Control Agreements

• Are employment/severance agreements necessary?
• Don’t 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 CEO’s 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