This week, Heinz sounded a lot like American did last week (as we noted) in justifying the size of a golden parachute for its CEO upon the completion of a merger. Heinz’s spokesperson claimed that payments to its CEO William Johnson totaling $56 million "reflect Mr. Johnson’s success in creating billions of dollars in shareholder value," including "the 19% premium" that Heinz shareholders are to receive for their shares when Heinz is acquired by Berkshire Hathaway and 3G Capital. For those of us who consider $56 million to be a whole lot of money – no matter what they guy did for ketchup sales – the spokesperson might also have said that only about $17 million of that amount (okay, still a whole lot of money) is really a golden parachute.
In Latin, it’s “Finis Coronat Opus”: the finish crowns the work. It’s a reminder that when you’re leaving a job, it’s important to exit with the same grace, charm, and respect for your colleagues and the business’s stakeholders that helped get you the job in the first place.
You can also talk about Battletoads, which Groupon’s CEO Andrew Mason did in a memo he sent to the company’s employees last Friday, shortly after he was fired by Groupon’s board.
You should, however, be careful what you say.
Now that Suits by Suits is on Twitter, you and your friends can follow us here to get up-to-the-minute Suits by Suits updates. If you missed us last month, check out Suits by Suits’ posts, inspired by current events, on legal issues affecting companies and high-level employees:
Capping off a big week in Suits by Suits, where even the Pope has to give two weeks’ notice before resigning:
The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Act”) required every public company to disclose its incentive-based compensation and to adopt a policy to recover from current and former executives, in the event of a restatement, any such compensation that would not have been awarded under the restated financial statements. As a result of the Act, many public companies in America have adopted new compensation “clawback” policies, even though the SEC has yet to promulgate regulations as required by the statute and there is no effective date for implementing these requirements.
On Friday, we reported on American Airline CEO Tom Horton’s golden parachute in the merger agreement between American and US Airways. American is asking the court overseeing its bankruptcy to approve the merger agreement, which includes a letter agreement between American and Horton. The letter agreement provides that Horton’s employment with American will be terminated at the time of the merger, and – so long as he agrees to release American and US Airways from any claims – he will be paid severance totaling nearly $20 million in cash and stock.
Why would any company agree to such a thing? According to American, its agreement with Horton is “in recognition of [his] efforts in leading [American’s] restructuring and his role in enhancing the value of [American] and overseeing the evaluation and assessment of potential strategic alternatives that culminated in the Merger.” In other words, to compensate him for helping to make possible a good merger and then getting out of the way. The new company created by the merger can only have one CEO, and it is best for the new company not to be distracted by disputes with former executives of the old company.
We’re not sequestering this week’s Suits by Suits news:
As we’ve previously discussed in a number of posts, the Dodd-Frank Act of 2010 created a bounty program to reward whistleblowers who report useful information to the Securities & Exchange Commission (SEC), and also instituted new legal protections for whistleblowers. The SEC’s Inspector General recently took a hard look at the SEC’s implementation of these reforms, and reported his conclusions in a 43-page audit report.
So how’s the SEC doing?
Many people love the ABC medical drama Grey’s Anatomy. I’m not one of them. Maybe it’s because I generally dislike any show in which a character is assaulted by an icicle.
Recently, however, the show featured an issue that is near and dear to the hearts of those of us who focus on executive-employer disputes: non-compete agreements. The episode in question involved a plotline in which the lead characters were planning to buy their own hospital. They concluded that they couldn’t tell one of their colleagues about the plan, because he had a non-compete/non-disclosure agreement with a competing buyer, and he could end up in jail if he breached that agreement. Did the show get this right?
In Part 1 of this series, we relayed the case of Pamela Hill, an engineer with the Virginia Department of Transportation. Hill was passed over for promotion. Another applicant, a man, who has less experience than Hill and doesn’t have a college degree like she has, got the job. VDOT’s only reason for the decision is that the man did better in the interview.
Hill sued VDOT, alleging sexual discrimination in violation of Title VII of the Civil Rights Act. VDOT moved for summary judgment – an early resolution in its favor – and at the end of this post, I’ll tell you if Hill won or not.
As the regulatory and business environments in which our clients operate grow increasingly complex, we identify and offer perspectives on significant legal developments affecting businesses, organizations, and individuals. Each post aims to address timely issues and trends by evaluating impactful decisions, sharing observations of key enforcement changes, or distilling best practices drawn from experience. InsightZS also features personal interest pieces about the impact of our legal work in our communities and about associate life at Zuckerman Spaeder.
Information provided on InsightZS should not be considered legal advice and expressed views are those of the authors alone. Readers should seek specific legal guidance before acting in any particular circumstance.
John J. Connolly
Partner
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Andrew N. Goldfarb
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