Tyco Sets Exec Severance Limits

July 14, 2003 (PLANSPONSOR.com) - Tyco International has adopted limits on executive severance pay in the wake of an accounting scandal in which former top executives allegedly stole $600 million from the firm.

In a prepared statement Friday, Tyco, which is still incorporated in Bermuda (see Tyco Offices Staying Put ), also said it adopted guidelines that require senior executives to hold a minimum percentage of shares acquired through equity awards and, over time, to hold a certain amount of company stock, according to Dow Jones.

Previously, Tyco had no official corporate policy on severance and no requirement for stock ownership by its senior management or board.

Tyco said senior executives will now be limited to cash severance of two times base salary and bonus at the time of termination, and payments of 2.99 times base salary and bonus in a change-of-control situation. The company said the new minimum-ownership guidelines range from two times base pay for senior vice presidents to ten times base pay for the CEO.

For directors, the cash compensation for individual members will remain at $80,000. Directors will also receive $120,000 a year in deferred stock units that will be paid out in shares only at the time of a director’s retirement from the board. Directors were previously paid a comparable value in the form of stock options, according to the Dow Jones report.

Tyco said it will grant additional pay for committee chairs, including:

  • $20,000 for the audit committee chair,
  • $20,000 for the lead director, and
  • $15,000 for the compensation or governance committee chair