Implementing a formal severance policy supported this organization’s desire to attract and retain its key employees in the event of a qualifying termination or change in control.
A publicly traded, entrepreneurial, and customer-focused company with diversified interests in the agriculture and transportation markets, more than 40 locations and nearly 3,000 employees was considering implementing a formal severance policy for the members of its key leadership team. The only similar policy which existed was an informal practice of paying cash severance in the event of job elimination. The company had no formal policy in place to protect the interests of key leadership in the event of a qualifying termination or job loss following a change in control.
The company recognized that the uncertainty regarding the consequences of a change in control could adversely affect the company’s ability to attract, retain, and motivate its key talent and wanted to ensure continuity of management during any potential mergers or acquisitions. In addition to change in control situations, the company recognized the difficulty its key employees would have in obtaining comparable employment if such employment were involuntarily terminated. The company also appreciated the concerns of shareholders regarding severance benefits. The challenge was to strike the proper balance.
Planning meetings were first held with members of human resources to define the overall objectives of the severance policy. Policy provisions were compared with general market practice for overall competitiveness. Findley’s consulting staff and company management worked together to address the key policy decisions. Technical issues related to the delivery of post-termination benefits were identified and resolved. A final severance policy was developed that was competitive, fair, reasonable, and which closely aligned with shareholders’ interests. Findley also assisted the company with drafting the policy document.
With the help of Findley, the client successfully implemented a policy that serves as an incentive to key talent to remain employed by the company and assures the key talent’s objectivity in evaluating a potential change in control situation, thereby promoting the best interests of the company and its shareholders.Case Studies