In Depth
A change of control (CoC) is a defined corporate event that triggers special provisions in executive employment agreements, equity award plans, and severance arrangements. The specific definition varies by company but typically includes an acquisition of a specified percentage of the company's voting stock (often 20-50%), a merger or consolidation where existing shareholders lose majority control, the sale of substantially all company assets, or a change in the majority of the board of directors within a specified period. Change-of-control provisions in executive agreements can include accelerated vesting of equity awards (either "single-trigger," which occurs automatically upon the change of control, or "double-trigger," which requires both the change of control and a subsequent termination of employment), enhanced cash severance payments, continuation of benefits, and outplacement services. Proxy advisory firms and institutional investors strongly prefer double-trigger vesting because single-trigger acceleration can result in large payouts to executives who continue working for the acquiring company without any interruption. The SEC requires companies to disclose estimated change-of-control payments in the proxy statement, providing shareholders with a clear picture of the potential cost. For companies involved in pending mergers, a separate "golden parachute" advisory vote under Dodd-Frank gives shareholders a non-binding say on the change-of-control payments to named executive officers. Change-of-control provisions are negotiated as part of the executive's initial employment agreement and are a critical element of the total compensation package that executives evaluate when considering new positions.