Most Companies Receive Wide Support on Severance

Most Companies Receive Wide Support on Severance From Ted Allen of ISS: The Dodd-Frank Act also requires companies to hold separate shareholder votes on "golden parachute" arrangements when they seek approval for mergers, sales, and other transactions. However, the SEC rules on this mandate did not take effect until April 25, so less than a dozen companies have held parachute votes this year. As of Aug. 7, seven Russell 3000 companies had reported the results of golden parachute votes, and five earned more than 89 percent support. These results suggest that investors will tend to support a company's golden parachute payments if they believe that the overall transaction has merit. There have been two exceptions so far. On July 26, MedCath Corp. received almost unanimous support for two asset sales, but just 82.6 percent support on its severance arrangements. At SAVVIS, the sale of the company to CenturyLink earned nearly unanimous investor approval on July 13, but the severance arrangements received just 70 percent support. It appears that SAVVIS investors had concerns over $3.9 million in potential tax gross-up payments for CEO James Ousley. Two companies have yet to report vote results, and six more severance votes are scheduled for the next two months.

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