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DuPont adopts executive severance and bylaw changes in advance of Trian stake disclosure
August 13, 2013 | Robert Westervelt
DuPont has adopted a cash payout severance plan for senior executives fired following a company takeover and also changed company bylaws regarding advance notice of shareholder meetings and nominations, according to regulatory filings. DuPont's board approved the changes yesterday, 12 August, in advance of a possible disclosure that activist hedge fund Trian Fund Management (New York) has taken a stake in the company.
DuPont shares soared 5.3% on 17 July following reports on CNBC that Trian acquired a large stake in the company. Trian declined comment, but is expected to disclose equity holdings as of 30 June by tomorrow, 14 August. Institutional investors generally have 45 days after the end of a calendar quarter to disclose their investments under SEC reporting requirements.
DuPont was one of the few remaining major industrial companies and chemical makers that did not provide severance or change in control payments for top executives. DuPont noted regularly in compensation disclosures, including this past March, that it does not provide severance or change in control payments and supplemental retirement benefits “because they do not support our guiding principles.”
Under the severance plan adopted 12 August, senior company officers would receive a lump sum cash payment equal to two times base salary and target bonus if terminated within two years of a takeover. The CEO would receive a buyout package equal to three times compensation. Executives would also receive continued health and dental benefits, financial counseling, tax preparation services and outplacement services for two years under the plan.
“These are customary plans with provisions similar to those in place for many Fortune 500 companies and our peer companies,” says a DuPont spokesperson. “The purpose of these plans is to reduce uncertainty and distraction for key employees in the event of an impending change in control and to retain key employees.”
DuPont also made amendments to corporate bylaws regarding advance notice of special stockholder meetings, the presentation of shareholder nominations and proposals, and a provision that would require certain shareholder disputes to be heard in Delaware’s state chancery court. “We regularly review our governance practices, including our by-laws, to bring them in line with best practices and our peers,” the spokesperson adds. “The exclusive forum provision and the advance notice bylaws we have adopted are part of this process.”
DuPont announced 23 July that it is exploring the sale or spin-off of its $7-billion/year performance chemicals unit as part of its transformation to a “higher growth, less cyclical company.” DuPont’s performance chemicals business includes titanium dioxide (TiO2), fluorochemicals, and specialty and industrial chemicals.