Nadia HaddadCRP
Director of Rewards, MEA, Qasr Holdings
Dana Whitfield· Director, Global Compensation, Meridian Health Systems
Asked in Executive Compensation ·
Buying out forfeited awards for an external CEO hire: how do you avoid overpaying?
Canadian listed consumer goods company, C$6bn market cap. We are close to appointing a chief executive from a larger US competitor. She will forfeit unvested equity that her advisers value at US$14m.
That figure assumes all her performance awards vest at target. Her current employer's last two cycles paid 60% and 45%. Our committee wants to replace what is lost, like for like, and not a dollar more, but the two sides are a long way apart on what was actually lost.
How have others valued the forfeited awards, and how did you structure the replacement?
0 reactions · 4 replies · 5 views
Accepted answer· by James Okafor
A way to close the gap without arguing over the discount: replace the performance awards with performance awards. We granted face value equal to her target number, but under our own plan with our own conditions. If we perform she receives the full amount, if not she receives what our other executives receive. Her advisers could not easily object, since they had been arguing the awards were worth target. And the committee could tell investors that only the time-vested portion, about 40% of the total, was guaranteed.
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