New Report: Executive Compensation Issues in a Spin-off

Melissa Burek and Eric Hosken of Compensation Advisory Partners have issued a report which describes four critical work streams for executive compensation in a spin-off.

Here's a summary:
 
"Spin-offs have been in the news for several years (60 in 2014; 40 in 2015; major spin-offs completed by Alcoa, Danaher, Emerson Electric, Johnson Controls, and Xerox in 2016). Spin-off activity will continue into 2017 with a number of pending transactions including major companies like Ashland, Biogen, Hilton Worldwide, and MetLife. The need to create shareholder value during a period marked by low returns from most asset classes is driving the spin-off activity. In some cases, activist shareholders have pushed companies to create value by breaking businesses into their component parts. When a business undergoes a spin-off, the human resource and executive compensation implications for executives at both the Parent Company (ParentCo) and the Spin-off Company (SpinCo) are very significant.
 
Having advised many companies as they worked through the spin-off process CAP has identified four critical work streams for executive compensation:
Establishing Transitional Compensation Arrangements (e.g., near-term retention plans)
Understanding and/or Modifying Outstanding Compensation Arrangements (e.g., outstanding equity awards, severance and change in control agreements, benefit plans, etc.)
Developing Going Forward Compensation Programs for SpinCo, equivalent in many ways to standing up a newly public company in an IPO
Modifying Compensation Programs for ParentCo, as necessary to reflect new business focus and business scale"
 

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