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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






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