The Advisors' Blog

– Broc Romanek, CompensationStandards.com

Despite a decline in economic activity, golden parachute payments for CEOs increased by 32% over the past two years, according to a study by Alvarez & Marsal Taxand. The study, which analyzed current change in control arrangements among the top 200 publicly traded U.S. companies, revealed the increase was driven primarily by equity-based payouts and tied to a company’s performance.

Of note, double trigger vesting has increased, as shareholders are more reluctant to pay out CEOs upon a change in control without termination of employment. 53% of companies in 2011 offered at least one plan that provided double trigger vesting, up from only 28% in 2009. Additionally, companies are reducing gross-up payments, which cover the full amount of any excise tax imposed upon the executive in a change in control situation.

Key findings include:

– 78% of CEOs and 80 percent of other named executive officers (NEOs) are entitled to receive a cash severance payment upon termination in connection with a change in control
– The majority (59.4%) of benefits are long-term incentive benefits, such as restricted stock/options, that are tied to performance
– Only 49% of CEOs have excise tax gross-up or modified gross-up protection, compared with 61% in 2009 and 66% in 2007.