More golden years: Sempra Energy & Twin Disc…

September 22, 2011

On Wednesday, we footnoted a retirement sweetener for the new chief executive of Wendy’s (WEN). But it’s far from the only company goosing executive retirement benefits for the folks that run things. So while you watch this morning’s stock-market rout, consider the ways some corporate executives and directors are protecting their own futures:

— Nestled in the severance benefits available to Sempra Energy (SRE) President Mark A. Snell if the company should be acquired, is a pension sweetener. In effect, it adds as much as seven years on to Snell’s career — years he wouldn’t actually have to work in order to see them swell his pension (which already stood at $4.8 million at the end of last year, according to Sempra’s proxy). Here’s the actual language defining the “Pension Supplement”:

“Such Supplemental Retirement Benefit shall be determined by crediting the Executive with additional months of Service (if any) equal to the number of full calendar months from the Date of Termination to the date on which the Executive would have attained age 62.”

Moreover, this sweetener — spelled out in a severance pay agreement that accompanied the employment agreement amendment promoting him to president, all filed with an 8-K Friday — is to be awarded “without regard to whether the Executive has attained age 55 or completed five years of ‘Service'”, which are ordinarily conditions for collecting; in other words, Snell is automatically fully vested and treated as eligible to retire.

Snell was 54 at the end of 2010, and so is close to 55 now. That means crediting him through age 62 could get him as much as 84 months’ additional pension credit — as much as a 70% increase over his actual tenure at the company. And it comes in addition to severance, immediate vesting of outstanding equity, up to $25,000 in financial-planning services, $50,000 of outplacement assistance and up to 24 months continued health insurance.

— Corporate boards, of course, are the ones signing off on these kinds of arrangements, and in some cases, they’re taking care of themselves nicely as well.

Over at tiny Twin Disc (TWIN), a $338-million market-cap maker of heavy-duty and marine power-transmission equipment, directors are expected to retire, by not standing for re-election, once they reach age 71 (though for some reason former CEOs are exempt from this requirement). But those that serve at least one full three-year term don’t leave empty-handed, according to the proxy Twin Disc filed on Friday:

“an outside Director who retires from the Board, resigns from the Board, or decides not to stand for re-election to the Board (i.e. reaches ‘retirement’) shall be entitled to annual retirement pay equal to the cash portion of the annual Director’s retainer (exclusive of any committee chair fees) last paid to the Director prior to his/her retirement.”

Notice that this is “annual retirement pay,” not a one-time payment. Granted, this is a relatively small company, so cash retainers for the most recent fiscal year were $45,000. It isn’t a fortune, but it does mean that anyone on the board for a full term is essentially going to be paid for life, and that adds up.

Past attempts to rein in executive pay by legislative fiat have usually just encouraged companies to shift pay to other areas: So the million-dollar salary cap encouraged big options grants and supplemental pensions; options expensing (among other factors) has encouraged big restricted-stock awards. Like the poor, we suppose lavish pay of one sort or another will always be with us — at least as long as shareholders put up with it.

Image source: BullionVault via Flickr

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