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At Genzyme, Laid Off Workers Lose Stock Bonus... but the CEO Keeps His

Before Sanofi (SNY) bought Genzyme, the latter began a program of 1,000 layoffs to make itself more efficient. Any workers who lost their jobs instantly had their restricted stock units -- shares that vest over time as an incentive -- canceled. Almost 400 staff were laid off before the buyout. In the executive suite and the boardroom, however, Genzyme's SEC disclosures indicate that former CEO Henri Termeer and his team got to keep all their restricted stock units, and that they vested immediately when Sanofi bought the company. Termeer's RSU's were worth about $9.5 million of his $208 million termination package.

Here is the relevant section of the notice that Genzyme's HR department handed to employees who lose their jobs (click to enlarge):


A former Genzyme executive shared with me his vesting schedule, which now features three rows of zeros, representing three years' of RSUs that were nixed. Compare that to the fate of Termeer et al., whose RSU's were treated this way, according to the company (emphasis added):

... all Company RSUs, including any Company RSUs that otherwise would vest based on the achievement of performance conditions, that are outstanding immediately prior to the Acceptance Time will vest in full immediately prior to the Acceptance Time.
The result is that Termeer is walking out the door with $9.5 million in RSU cash that many of his laid-off employees simply are not eligible for. Here's the table (click to enlarge):


A Genzyme spokesperson said:

All unvested restricted stock units and stock options fully vested for all Genzyme employees upon change of control.
That's true -- surviving employees got to keep their RSUs. On the one hand, it seems minor to complain that a drug company CEO whose exit package is worth $208 million (and maybe as much as $300 million) got a $9.5 million bonus he did not earn. He negotiated that package, and it paid out. But the layoffs began before Sanofi bought Genzyme, and at the same time Termeer was arguing his company was worth more than Sanofi was offering. One way to make a company more valuable to an acquirer is to reduce its employee expenses.

This is one of those contradictions that undermines public confidence in corporations, and employee confidence in management. The people responsible for this lousy corporate governance are board compensation committee members Charles L. Cooney, Victor J. Dzau, Douglas A. Berthiaume and Robert J. Carpenter. What they have engineered is at best unfair and at worst a kind of legal scam. Neither Genzyme nor Sanofi immediately returned calls.

Correction: This item was updated to reflect the fact that not all 1,000 employees targeted for job cuts in September last year actually lost their jobs before the Sanofi takeover.
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