Genentech Ditches Stock Options to Fund $371 Million Retention Plan - 8/22/08

Genentech Ditches Stock Options to Fund $371 Million Retention Plan

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Since Roche announced its intention to buy the outstanding shares of Genentech, everbody’s been wondering whether the company’s top scientists will bolt. Genentech put a retention plan in place yesterday — but the main payouts would only keep people around until next June.

Genentech said yesterday that it’s taking the $371 million it was
planning to put into employee options, and shifting it over to a
stay-with-us fund. Here’s the company’s SEC filing describing the plan.

Basically, if Roche buys Genentech before July of next year (a pretty likely scenario), employees who are still at the company on June 30, 2009 will be eligible for a retention bonus.

CEO Art Levinson is in line for an $8.4 million bonus. Other top
execs would get between $2.7 million and $4.6 million apiece. Ordinary
employees would, presumably, get more ordinary payouts.

The filing also spells out a severance plan that would kick in if
Genentech employees get fired by Roche “without cause” or resign after
the merger for “good reason.” For regular folks, “good reason” is
defined as a pay cut of 15% or a change in work location that increases
the commute by more than 50 miles. For execs, good reason also includes
“a material reduction in authority, duties and/or responsibilities.”

For Levinson, the terms of the severance plan would be worth several
million dollars. That means he could walk away next year with severance
and retention payments worth well over $10 million.

Photo: Associated Press