by Cydney Posner
As reported in this article in the WSJ, compensation consultant Towers Watson is reporting that shareholders seem to be more willing this year than last to approve golden parachutes in the context of acquisition transactions. As you know, Dodd-Frank and related rules require that, in connection with solicitation of shareholder approval of an acquisition, the company (typically the target) must also seek a say-on-golden-parachutes vote (unless previously approved), that is, a separate advisory shareholder vote on any agreements or understandings with insiders concerning compensation arising out of the merger transaction.
Surprisingly, the WSJ reports that, even though “the volume of corporate takeovers announced this year has almost doubled, only one company has failed to get shareholder support for lucrative severance packages that follow senior executives out the door.” That compares to nine failed votes in 2013 and eight in 2012 among the Russell 3000 companies studied by Towers Watson. This year to date, companies, on average, have received 81% support for golden parachutes, the WSJ reports. A Towers Watson representative observed that there is “a heightened sensitivity to certain features…..Companies may be making fewer last-minute alterations to these agreements.”