When Alex Molinaroli left Johnson Controls International plc 18 months ahead of schedule, he became eligible for cash severance and bonus payments of more than three times what he would have gotten had he stuck around.
The terms of the merger between Johnson Controls Inc. and Tyco International plc called for Molinaroli to stay on as chairman and chief executive officer for 18 months after the merger. He would then be executive chairman for 12 months before retiring.
That timeline would have made him eligible for an estimated “golden parachute” of almost $39 million, but he agreed to receive $20 million as part of an amended employment agreement.
The JCI board, however, opted in August to accelerate the timeline, moving president and chief operating officer George Oliver into the chairman and CEO roles. Molinaroli left the company and was no longer eligible for the $20 million package. Instead, he’ll receive roughly $63 million in payments.
It’s common for companies to have change of control agreements in place with their top executives. Courtney Yu, associate director of research at California-based Equilar Inc., which tracks executive compensation, said the packages offer a safety net for executives to pursue transactions in the best interest of shareholders.
“Without one, executives might not be motivated to go through with a merger because of what it might mean for their own jobs,” Yu said.
Molinaroli’s package included three times the sum of his base salary and average performance bonus, which Yu said is on the higher end as companies have shifted toward a two-times multiplier. Other elements of his package are quite common, she said.
In the Milwaukee area, Molinaroli’s severance package is well ahead of the field. The average is roughly $12.8 million, while the median is around $8.8 million. It is worth noting companies use a variety of different structures for change of control agreements that alter when they are triggered. Some don’t include severance payments and some don’t have them in place at all.
Here are the top 10 payments that could be triggered locally, based on a BizTimes review of securities filings as of Sept. 7:
- Jeffery Yabuki, Fiserv Inc., $41.5 million
- Jonas Prising, ManpowerGroup Inc., $36.2 million
- Paul Manning, Sensient Technologies Corp., $29.1 million
- Nicholas Pinchuk, Snap-on Inc., $28.3 million
- Allen Leverett, WEC Energy Group Inc., $26.8 million
- Ajita Rajendra, A.O. Smith Corp., $26.3 million
- Joel Quadracci, Quad/Graphics Inc., $25.5 million
- Matt Levatich, Harley-Davidson Inc., $19.9 million
- Todd Teske, Briggs & Stratton Corp., $19.8 million
- Philip Flynn, Associated Banc-Corp, $16.9 million