“Severance or termination payments” include cash, equity or other pay that is paid out or vests due to a senior executive’s termination for any
reason. Payments include those provided under employment agreements, severance plans, and change-in-control clauses in long-term equity plans,
but not life insurance, pension benefits, or deferred pay earned and vested prior to termination.
“Estimated total value” includes: lump-sum payments; payments offsetting tax liabilities, perquisites or benefits not vested under a plan generally
available to management employees, post-employment consulting fees or office expense and equity awards if vesting is accelerated, or a
performance condition waived, due to termination.
The Board shall retain the option to seek shareholder approval after material terms are agreed upon.
Generous performance-based pay can sometimes be justified but shareholder ratification of “golden parachute” severance packages with a total
cost exceeding 2.99 times base salary plus target short-term bonus better aligns management pay with shareholder interests.
For instance at one company, that does not have this policy, if the CEO is terminated he could receive $44 million in termination pay—over 10
times his base salary plus short-term bonus. In the event of a change in control, the same person could receive a whopping $124 million in
accelerated equity payouts even if he remained employed.
It is in the best interest of Bank of America shareholders and the morale of Bank of America employees to be protected from such lavish
management termination pay for one person.
It is important to have this policy in place so that Bank of America management stays focused on improving company performance as opposed to
seeking a business combination simply to trigger a management golden parachute windfall.