Ralcorp acquisition approved overwhelmingly but Say on Golden Parachute vote did not receive majority support

Last week Ralcorp’s shareholders approved the company’s merger with ConAgra Foods with over 99% support. However, the advisory vote on the payments associated with the change in control received only 45% support, with 48% voting against and 6% abstaining. Say on Golden Parachute votes are non-binding shareholder votes on compensation arrangements associated with mergers and acquisitions. The vote is effective for all merger proxies filed after April 24, 2011. Similar to the regular Say on Pay vote, it is unusual for a company to receive less than majority support for the Say on Golden Parachute vote. Since the rule was implemented in 2011, 99 companies have passed and only 5 companies have failed. The Ralcorp payments included several elements that shareholders typically dislike, such as: 1) Modified single trigger cash severance payments (i.e., executive can choose to quit within a certain period before or after the CIC and still receive a payment) 2) Excise tax gross-up 3) Retention payments 4) Single trigger vesting on equity   The total value received for the CIC by the CEO was $36 million according to the company’s filing. The other executives will receive between $12 and $13 million. Approximately $21.4 million of the CEO’s value and $6.8 to $7.5 million of the other executives’ value is due to equity vesting. The company’s proxy filing describing the termination payments can be found here.