What's a departing CEO worth after a merger? Not $85 million, according to nearly 5 million Hi-Tech Pharmacal ($HITK) shareholders. But while an advisory vote revealed that many investors were less than enthused with CEO David Seltzer's golden parachute, he'll still get his money when the company merges with Lake Forest, IL-based Akorn Pharmaceuticals ($AKRX).
According to a Dec. 19 regulatory filing, more than 87% of shareholders voted to approve the sale of the Long Island, NY-based company to Akorn for $640 million. But they were a bit more hesitant about top execs' postmerger compensation packages; only 45% voted in favor, while 39% voted against.
As Long Island's Newsday reports, Seltzer's package could total nearly $85 million when all is said and done. That includes $81 million from stock and vested options he currently owns, plus $1.1 million from accelerating unvested stock options and $2.7 million in cash severance and other benefits, the newspaper said, citing securities filings.
Some shareholders may have balked at the disparity between the packages' worth and Seltzer's annual compensation, which reached just $2.4 million for the 2013 fiscal year, according to a regulatory filing. Others may have compared it to the packages of other recently bought-out CEOs like Onyx's Tony Coles, who scored $58 million on Amgen's ($AMGN) $10.4 billion pickup of the biotech in August.
James Reda, an executive compensation consultant in New York, simply chalked the vote up to human nature. "Some people are cheap," he told Newsday. "I don't think it necessarily means anything more than that, because that deal was more than reasonable."
Nonetheless, a pattern seems to be emerging when it comes to M&A activity, Newsday notes. While shareholders may be behind a company's sale, they're more cautious about the exec pay that comes along with it. The newspaper quotes compensation data from consultants Pearl Meyer & Partners, which shows that median shareholder support for mergers hovers around 99% since 2011, compared with about 88% median support for golden parachute packages.
While U.S. execs usually reap the largest pay packages, executive compensation has been a hot topic around the globe as of late. This summer, a class-action lawsuit settlement forced Israeli generics giant Teva ($TEVA) to disclose pay for its top execs individually, closing a loophole that had allowed the company to report them as a group. And Novartis ($NVS) announced in September that it would shrink its leaders' pay after its notoriously high salaries--as well as a controversial exit arrangement with outgoing CEO and chairman Daniel Vasella--helped incite new country-wide corporate pay restrictions.
- see the regulatory filing
- read the Newsday story
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