Wednesday, August 17, 2011
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?