Page 255 - Bruce Ellig - The Complete Guide to Executive Compensation (2007)

Chapter 6. Employee Benefits and Perquisites 241

Type Formula Years of Service
Standard
Termination 5 Years 10 Years 15 Years 20 Years 25 Years
3 months 3 0.54 0.88 1.12 1.40 1.69
weeks per year
2 months 2 0.44 0.63 0.83 1.02 1.21
weeks per year
2 weeks 2 0.23 0.42 0.62 .81 1.00
weeks per year
Tin Parachute
0.38 0.77 1.15 1.54 1.92
Golden Parachute

2.99
5% 2.69 2.69 2.69 2.69 2.69

10% 2.45 2.45 2.45 2.45 2.45
20% 2.00 2.00 2.00 2.00 2.00
Silver Parachute

1.99
5% 1.79 1.79 1.79 1.79 1.79

10% 1.63 1.63 1.63 1.63 1.63
20% 1.33 1.33 1.33 1.33 1.33
Bronze Parachute

0.99

5% 0.89 0.89 0.89 0.89 0.89
10% 0.81 0.81 0.81 0.81 0.81
20% 0.66 0.66 0.66 0.66 0.66
Table 6-6. Severance pay in years

How Much Severance Pay Is Too Much? Some would argue that company payments of
unvested long-term incentive payments also constitute severance payments. The same would
apply to forgiveness of remaining vesting requirements of pension payments. It is easy to
see how “severance” could exceed four or more times annual pay. One could argue that the
company (or shareholders) should adopt an umbrella policy for severance payments (e.g., all