Healthcare CEOs see an average of $25 million in benefits as a result of being dismissed during a merger or takeover, according to a recent Alvarez & Marsal and Equilar study.
Public companies are required to measure and disclose the size of change-in-control benefits to top executives. The payments include severance, continuation of health and welfare benefits, outplacement services and excise tax protection.
Researchers gathered data on the benefits received by CEOs and other named executive officers for the 20 largest public companies in 10 different industries, according to market capitalization.
Here are five findings on how healthcare CEO benefits compare to other industries:
1. The 2017 average total separation benefit package for healthcare executives was approximately $25 million. The information technology industry had the highest average — approximately $38 million — and telecommunications had the lowest value at approximately $20 million.
2. Long-term incentives made up the largest component of change-in-control packages for CEOs in all 10 industries. For healthcare, long-term incentives made up approximately $16 million of the $25 million total.
3. Seventy-six percent of CEOs receive a cash severance payment upon termination in connection with a change in control, according to the study. Severance payments comprised approximately $8 million for healthcare, which ranked second to highest. The industrials industry averaged the greatest severance payments, at approximately $9 million.
4. CEOs frequently receive continuation of health and welfare benefits upon termination of employment in connection with a change in control. In the healthcare, information technology, industrials and materials industries, this benefit is provided to other named executive officers more often than CEOs.
5. Executives receive other benefits, such as outplacement services to help them find suitable employment and enhancement of retirement benefits. In the healthcare industry, 45 percent of executives received outplacement services and 35 percent of executives received enhancement of retirement benefits.