Most of the forms of generous compensation already had names before I began to write this blog (see: golden parachutes, golden handcuffs, golden hellos, golden goodbyes, and even golden coffins). I was beginning to despair of an ignominious retirement without having ever named a form of compensation, when I saw that some companies are making significant payouts to senior executives who attempted a major merger or acquisition but fell short. Like a trophy or medal for finishing fourth.
To give just one example, in its proxy statement filed in October 2015, following the FTC’s action to block Sysco Corporation’s merger/acquisition of US Foods, the Sysco Compensation Committee approved modest (less than $500,000 to the CEO) “special incentive and retention payments” to its NEOs.
On July 10, 2015, based on (a) the strong desire of the Committee to motivate and retain certain senior officers as they transition their focus from integration planning for the terminated merger with US Foods to pursuing other operational and strategic initiatives, (b) an effort to recognize that these individuals have played critical roles in the development of the future business strategy of the Company in conjunction with their integration planning work, and (c) recognition of the work product generated by the integration planning teams under the direction of senior officers, which will be of considerable value to the Company in the future, the Committee approved a one-time incentive and retention cash payment to such officers.
Actually, I am being unfair to the executives and companies involved, because a very strong argument can be made for these payments. First, these payments are really a form of retention payment necessary to allow the executives to devote countless hours, above and beyond the requirements of their day jobs, to a transaction that may result in losing their jobs. Second, most of these payments seem to be made after the executive’s herculean efforts to negotiate and close a transaction were thwarted by some bureaucratic agency’s dogmatic rejection of the combination. Finally, the long, drawn-out process can wreak havoc on other areas of corporate performance, resulting in reduced compensation to executives.
On the other hand, one might argue that the shareholders likely did not get much of a reward for the failed transaction (chances are that the stock price declined precipitously when the deal was scuttled).
Someone may have already named this relatively new form of payout – or picked a better name. However, until I hear of it, I suggest “Golden 4th Place Awards” (or “Golden Also-Ran Awards” maybe?).