Pfizer Inc., the world's biggest drug maker, is significantly reducing the value of the severance packages for top managers in a nod to public pressure to reduce sky-high executive pay.
The new executive severance plan took effect Monday, when the affected officers agreed to terminate earlier change-in-control severance agreements, according to a filing Friday with the Securities and Exchange Commission.
Stockholders of many major corporations in recent years have complained that top executives receive huge salaries, lavish perks and golden parachutes, sometimes when a company is doing poorly.
Pfizer's new plan would provide top officers, terminated without cause, with benefits including a severance payment equaling one to two times the total of their annual base salary and target bonus.
That still amounts to at least a few million dollars for some officers and nearly $10 million for Chief Executive Jeffrey Kindler. Terminated executives also would be eligible to continue medical and life insurance benefits at employee rates for up to a year.
Separate agreements would still cover multi million-dollar pension provisions, stock options and shares given as bonuses to executives.
Under the prior change-of-control severance plan, top executives would have gotten 2.99 times the total of their annual base pay and either their target bonus that year or the actual bonus they got the prior year. Actual bonuses are generally much larger than targets.
The new plan would cover 10 of Pfizer's 12 top executives. One of the others is retiring in April and the 12th, Chief Financial Officer Frank D'Amelio, has a separate agreement until September, when the new plan will cover him.
Other U.S.-based employees could be added to the plan later.