While change in control (CIC) arrangements face increased
scrutiny from regulators, shareholder activists and others, additional strategic
reasons exist for management and compensation committees to provide and
benchmark executive parachute payments.
The purpose of CIC arrangements is to ensure that executives
view every opportunity, including an acquisition, with an eye toward maximizing
shareholder value without considering how such an event will affect their
personal circumstances. By addressing CIC provisions in executive compensation
packages, boards can be assured that executives will be more likely to approach
the intricacies of negotiation without the distraction of personal
Compensation committees need to utilize parachute payment
arrangements as a tool to attract qualified candidates and to reward top
performers for the successful results of their strategies.
Shareholders have increased concerns regarding corporate
governance. By bench-marking and evaluating executive CIC arrangements, boards
and their compensation committees can demonstrate accountability to both
shareholders and regulators.