Reply #6: Big Severance Packages Mark Recent Deals

[54anickel]

'Empirical research seems to indicate that most companies underperform relative to the market after a merger while executives benefit from these large, one-time payouts.''


Stephen Taub, CFO.com

July 20, 2004

Sizable severance packages are alive and well, even after the passage of the Sarbanes-Oxley Act and despite a tepid economy.

As proof, just look at the payouts that several top executives are poised to receive following a few recent high-profile deals.

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Despite the pension fund's best efforts to block the deal, it was approved by shareholders at the end of June.

''In theory, change-in-control provisions make sense,'' said Tim Ranzetta, the president of Equilar, according to the Times. ''They encourage executives to act in the best interests of shareholders in transactions that they anticipate will increase shareholder value, which at the same time may harm their own careers. But empirical research seems to indicate that most companies underperform relative to the market after a merger while executives benefit from these large, one-time payouts