Allergan would pay $86M in 'golden parachute' taxes if senior execs dismissed
- Allergan's pledge to reimburse the tax bill on senior managers' severance packages if they are let go in the wake of the Pfizer deal could end up costing the company $86 million, Bloomberg reports.
- Two members of Allergan's senior team, CEO Brent Saunders and Executive Vice President Bill Meury are both slated to join the combined company post-merger. However, if that changed and Allergan's top five managers were let go, exit packages would amount of roughly $300 million, on top of the $86 million in reimbursed excise taxes.
- Pfizer and Allergan announced the $160 billion reverse merger last November, where the smaller Allergan will technically buy Pfizer so the combined company's tax domicile can be in Ireland. Corporate taxes in Ireland are 12.5%, far lower than the U.S. rate of 35%.
Saunders is currently in line to become president and chief operating officer of the combined company, while Bill Meury will be group president of global specialty and consumer branders.
The amounts highlights the often lucrative payouts senior executives can get even after being dismissed. So-called "golden parachute" payments are taxed at 20%.
As Bloomberg notes, the hypothetical severance payments don't match up with Actavis' previous governance practice of covering only part of executives' tax bills. (Note: Actavis bought Alelrgan for $65 billion in March 2015 but kept Allergan's name).
While these payments may be irrelevant if all of the top five senior executives are retained, it provides a glimpse into executive compensation. Golden parachute payments have fallen out of favor with increased investor pressure and involvement.
In another example of investor pressure on executive pay, AstraZeneca on Monday said it would consider ways to link the compensation of CEO Pascal Soriot to progress toward the company's ambitious $45 billion revenue target.