M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

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Wednesday, August 17, 2011

Mobility's Change of Control Agreement

Footnoted.com is doing yeoman's work reading lots of corporate filings so you don't have to.  Most recent example is Motorola Mobility's recent filing of a Change of Control Agreement (exhibit to their 10-Q) just a couple of weeks ago in advance of the announcement of transaction.  MMI's CEO stands to do pretty well when the transaction with Google closes. According to Footnoted.com:

Diving into the proxy, the amount that Chairman and CEO Sanjay Jha stands to make is pretty eye-popping: over $90 million, although that number includes a $22 million gross-up for taxes — something that Jha and other Motorola executives apparently agreed to give up earlier this year.

Still, even without the tax gross-up (can I get one of those, please?), $68 million is plenty incentive to get this deal done.  It's worth remembering that Change of Control Agreements are vestiges of the good old days of the hostile takeover movement.  I know it's hard for people to believe this now, but these severance agreements that guarantee huge payouts to managers in the event of a sale were a good governance reform!  They made sense at the time, but things, I think, have changed.  Given the amount of stock and options now used as part of any compensation package, managers are much less likely to have negative knee-jerk responses to acquisition offers.  For the most part, managers probably no longer need the extra kick that many of these severance agreements give - especially given the large amounts of negative attention they can sometime attract.  Remember Home Depot?

-bjmq

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