DealLawyers.com Blog

I loved Michelle Leder’s title of her footnoted.org blog today entitled “On Black and Decker’s CEO and unicorns…“. Michelle was referring to the Form 8-K filed by Black & Decker which reveals that its CEO would forego $20 million in severance, a sum he would be entitled to under his arrangements with the company as triggered by this week’s announced merger with Stanley Tools. The Washington Post ran this article today noting how this move is perhaps not as generous as it seems.

And here is a response from a member:

I don’t mean to throw stones, but Mr. Archibald is 66 years old. Why is he entitled to three years severance in the first place?

Based on my review of his new three year Executive Chairman Agreement, he is entitled to a base salary of $1.5 million per year, a target bonus of $1.875 million per year and long-term incentives of $6.65 million per year, (of which 50% is in stock options and 50% in restricted stock). Add to that, a 1 million share “sign-on” stock option grant (estimated value $15 million) and a Synergy Bonus Amount of as much as $45 million. All in, he could earn $90 million over the next three years, which would easily make up for his contract waiver if the company performs.

It is also worth noting that his current SERP is worth $35 million as of December 31, 2008, and he retained the right to an enhanced SERP if he is terminated before the end of the new contract term (i.e., he gets additional years of service and his foregone severance is included in the benefit calculation).

While I am glad to see a CEO waiving severance, it looks to me like he is getting it back, and then some.