Millions paid to a general counsel under a “change of control” provision

When Merck bought Schering-Plough in late 2009, Schering-Plough’s general counsel, Thomas Sabatino, lost his job but gained a healthy dose of termination benefits. As summarized by Corp. Counsel, June 2010 at 35, “he would be eligible for just over $12 million in severance payments, pension and medical benefits, and stock options.”

The lucrative departure package, a so-called “change of corporate control” right of some general counsel as an executive officer, became public in the proxy statement of the acquired company. It is likely that only the top lawyer has such a golden parachute, not the lawyers who report to him or her.

It is also likely that the dollar value of severance payments of that magnitude are not treated as expenses under the legal budget. Even so, if you try to assess the total cost to a company of maintaining a legal department, severance payments to lawyers should be included.