Canadian Lawyer

w w w . C A N A D I A N L a w y e r m a g . c o m A U G U S T 2 0 1 8 43 s businesses merge and acquire each other and shareholder expectations grow, the com- pensation of company exec- utives has evolved. Law- yers working in M&A and executive compen- sation say compensa- tion arrangements are more scrutinized today than they have been in the past, with shareholders, for one, casting a colder and more critical eye on payouts to executives when control of a company changes hands. "I definitely think you are seeing both boards and shareholders taking a harder look at change-of-control claus- es: when they're granting them, who they're granting them to and the nature of the compensation," says Michael Howcroft, a labour and employment lawyer at Blake Cassels & Graydon LLP in Vancouver. "I think I've seen increased pushback in relation to the generous change-of- control packages as part of a diligence process," he adds. "I'm hearing from my clients that they're getting pushback . . . in particular around change-of-control" situations. Normally, the definition of change of control is the acquisition by someone of 50 per cent plus one of the outstand- ing or voting shares, explains André Perrault, founder of boutique firm PCI- Perrault Consulting in Montreal, which advises organizations on compensation and designs termination packages. "Some organizations have change- of-control definitions simply because someone acquires as little as 20 per cent of outstanding shares," he says, adding that in banks, typically, change of con- trol is triggered by a 20-per-cent change of voting rights. Executive compensation can be affected differently depending on wheth- er the transaction is among publicly traded companies or if a private equity firm is the purchaser, for example. Compensation "gets focused on early on in the transaction," says Lynne Lacoursière, co-chair of the executive compensation practice of Osler Hoskin & Harcourt LLP in Toronto. It begins with developing a good understand- ing of the equity awards, she says, "so you understand what's at stake for the executive team." Negotiating executive entitlements gets pushed off until sign- off or close, as "you don't want execu- tives to focus on what they're going to benefit from." But while in the public company context awards are more likely to be worked out at a later time, in a typical private equity transaction, the purchaser L E G A L R E P O RT \ M & A A N D S E C U R I T I E S FAYE ROGERS Managing compensation in M&A Executive pay is being increasingly scrutinized in corporate deals By Elizabeth Raymer A

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