An influential advisory firm, which guides major institutional investors on voting at shareholder meetings, has recommended against a “golden parachute” proposal tied to a significant acquisition. While the firm advises supporting the $77.7 billion acquisition of a major media company, it opposes the compensation package that could see executives receive a combined total of $1.35 billion following the deal.
In a report released on Wednesday, the advisory firm, Institutional Shareholder Services, stated that the “extraordinary golden parachute” proposal was unwarranted. They estimated payments of $886.8 million for the CEO and $466.2 million for other executives. Concerns were raised particularly about an “excise tax grossup” estimated at $335 million for the CEO, in addition to substantial sums he is set to receive simply due to the acquisition.
The CEO’s future role within the merged entity, or with its affiliates, remains uncertain. Last year, during discussions with rival bidders, the CEO was reportedly offered a compensation package worth “several hundred million dollars.” There were also suggestions of him becoming chairman or even co-CEO and co-chairman of the combined company’s board.
As per a proxy report filed last month, none of the executive officers have finalized employment agreements with the acquiring company or its affiliates. If the CEO transitions into a chairman or CEO role, his golden parachute payment would not serve as a typical severance for job loss, as he would be moving into another position within the new company structure.
“The value disclosed in the golden parachute table for the CEO at over $886 million represents one of the highest golden parachute estimates ever observed,” the advisory firm noted in its report, although it acknowledged that this value might fluctuate based on the merger’s timing.
The advisory firm expressed “significant concerns” regarding the $335 million agreement designed to cover an excise tax the CEO would incur from the acquisition. This “grossup agreement” was described as an “extraordinary cost” that deviates from standard market practices. Such excise tax gross-up payments from a company to an executive are uncommon, as they cover an additional 20% tax burden triggered when an executive’s compensation exceeds three times their average total. This payment ensures the executive receives enough additional cash to offset the excise tax entirely. Notably, other executives are not receiving such an excise tax benefit.
Furthermore, the advisory firm highlighted that a significant portion of the CEO’s parachute payment is a result of “single-trigger benefits.” This means that the executive’s stock-based equity compensation accelerates vesting based on a single event, typically a change in company ownership. In contrast, most large-cap companies employ “double-trigger” vesting, requiring both a change-in-control and the executive’s job loss. While other executives’ awards are subject to double-trigger vesting, most of the CEO’s outstanding equity will automatically accelerate due to the acquisition.
This includes awards granted to the CEO in January, comprising over 3 million stock options and 2 million restricted stock units, valued by the advisory firm at a total of $107 million, though the options’ actual worth could be lower. The advisory firm’s report indicated that more than 94% of the CEO’s $887 million in payments stemmed from the tax gross-up and equity that automatically accelerates due to the deal.
The company stated that if the deal were to occur in 2027, no excise tax payment would be necessary for the CEO. However, the involved parties are working to complete the merger as soon as possible, with an expected closure by the end of the third quarter of 2026.
Shareholders are scheduled to vote on the acquisition and the executive golden parachute payouts on April 23. It is important to note that votes on the payouts are advisory and non-binding.
For this story, generative AI was utilized as a research aid, with editorial verification of all AI-generated content prior to publication.