Shareholders oppose Johnson Controls’ golden parachutes

Advisory vote shows distaste for merger-related executive pay


The plan to reward Johnson Controls Inc. executives with “golden parachute” compensation if they are terminated following the merger with Tyco International PLC is not sitting well with shareholders.


About 64 percent of Johnson Controls shareholders who voted on an advisory basis today opposed the compensation plan for the company’s named executive officers. The compensation vote was taken today when shareholders approved the merger of Johnson Controls and Tyco. The deal is set to go through on Sept. 2.

The golden parachute compensation would only be paid if the executive officer experienced a Johnson Controls qualifying termination immediately following the completion of the merger. The amounts would be paid in a lump sum severance payment of three times the executive’s annual cash compensation, plus pro rata performance bonuses and the payout of additional pension and retirement benefits they would have accrued over the two-year period following the merger.

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According to the company’s most recent proxy statement, chief executive officer Alex Molinaroli would be in line for $74.2 million in total compensation, $43.4 million of which would be in cash, if he were terminated after the merger. Molinaroli already is receiving a $20 million payout in cash and stock as a result of the merger under his change of control agreement.

And that’s not to mention his usual salary. Molinaroli’s base salary for 2016 is set at $1.6 million. Last year, his total compensation was $21.7 million with stock awards and bonuses.

Brian Stief, executive vice president and chief financial officer, would get $19.2 million if terminated post-merger. He will retain his role in the new organization.

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William Jackson would get $24.4 million in compensation in a golden parachute. He will serve as executive vice president and president of Building Efficiency for the new company.

Bruce McDonald is in line for a $19.2 million golden parachute, $1 million of which would be in cash. McDonald’s cash severance benefit is one year of base salary as of the termination date. He has been named chief executive officer of Johnson Controls’ automotive seating spinoff Adient.

Beda Bolzenius, who was scheduled to serve as chief operating officer for Adient but left Johnson Controls in March, is not entitled to compensation or benefits related to the merger.

Shareholders voted on whether the compensation laid out in the proxy should be paid or become payable to the named executive officers.

“The proposal gives Johnson Controls’ shareholders the opportunity to express their views on the merger-related compensation of Johnson Controls’ named executive officers,” according to the proxy statement.

Johnson Controls spokesman Fraser Engerman did not answer questions about whether the company would change the compensation plan as a result of the opposition vote by shareholders.

“The compensation proposal is similar to other deals of this size,” he said. “Many of the compensation features were already in place before the merger negotiations started. The compensation elements were just one of many factors considered by the board and were part and parcel of this transformative deal for shareholders.”

According to the proxy, “Consummation of the merger is not conditioned on approval of the Johnson Controls advisory compensation proposal. Because the vote is advisory in nature only, it will not be binding on either Johnson Controls or the combined company. Accordingly, to the extent Johnson Controls or the combined company is contractually obligated to pay the compensation, the compensation will be payable to the Johnson Controls named executive officers, subject only to the conditions applicable thereto, if the merger agreement is approved and adopted and the merger consummated, regardless of the outcome of the advisory vote.”

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