Twenty-nine top executives of Chemical Banking Corp. would be protected against pay cuts for three years if shareholders approve the company's scheduled merger with Manufacturers Hanover Corp., according to a filing with the Securities and Exchange Commission.
In addition, 18 executives of Manufacturers Hanover Corp. are virtually assured of lucrative farewell packages if they lose their jobs in the wake of the planned merger.
The companies' joint proxy filing - which designed Nov. 1 as the date when shareholders of both banks will meet to vote on the merger - revealed that the deal constitutes a change of control for both banks. Such a change triggers a golden handcuff rule that was put into effect at Chemical two years ago.
The rule guarantees that 29 Chemical executives who remain with the bank will receive cash pay for the next three years that at least matches their compensation over the previous 12 months. In addition, they will pocket a bonus for three years that equals their highest bonus over the previous three years.
The merger agreement also puts into effect so-called golden parachute rules for 47 executives of Chemical and Manufacturers. If the bankers - 29 at Chemical and 18 at Manufacturers - lose their jobs, they are guaranteed a multiple of their previous year's salary, a bonus, and full retirement benefits.
The proxy filing did not disclose the salary multiple at either bank. However, executive recruiters and bank insiders said that going-away packages typically equal at least the previous year's salary, bonus, and benefits.
The shares of both companies fell in heavy volume Tuesday as information from the proxy and reports of possible delays in the merger closing date hit the market.
Chemical fell 87.5 cents to close at $24.50 a share. Manufacturers' lost 87.5 cents, closing at $27.625.
Identities Close to the Vest
Bank spokesmen refused to disclose the identities of the executives covered by the clauses. However, insiders said they almost certainly include the 14 members of Manufacturers Hanover's management committee and the six members of Chemical's office of the chairman.
The proxy statement also confirmed reports that the companies' flagship bank subsidiaries will not merge until the second half of 1992. The holding companies' merger is scheduled to close on Dec. 31.
In an internal memorandum to employees, the companies said the schedule will ensure that "the two banks are integrated in an orderly and controlled manner."
The bank denied a report in Tuesday's American Banker that the apparent delay was caused by systems problems or demands for stronger capital ratios from regulators.
The banks said that the time-table will not affect their plan to record an estimawted $200 million of savings in 1992, the first year after the merger.
Companies with agreements that benefit entrenched management in the event of a merger or takeover frequently argue that they free executives to manage for the benefit of shareholders, rather than worry about their own futures. However, compensation experts said the number of executives protected in the Chemical-Hanover merger appears unusually large.
"Any company that has that number of protected executives at the top is subject to some sort of criticism," said Lee Pomeroy, an executive search consultant at Egon Zender International.
Mr. Pomeroy, a former Chemical employee, said five to 10 protected executives is more typical.
Although no senior executive at Chemical have announced intentions to leave, at least two Manufacturers Hanover officials may have already pulled their chutes, or negotiated a severance package that took the rule into account.
Terms of Johnson's Contract
Thomas Johnson, the former Manufacturers president who resigned shortly after the merger was announced, was contractually entitled to receive at least his annual salary of $650,000 through the end of 1992, according to Chemical's 1990 proxy statement. Mr. Johnson, who joined the bank at the end of 1989, had previously been president of Chemical.
James R. Brokken, a Manufacturers managing director in charge of global markets, has announced his resignation. Sources said that Mr. Brokken, who is on the management committee, is getting a severance package worth around $1.2 million. He would not comment on details of his negotiations.
Layoff Delays Predicted
Sources inside the two banks said that most employees were surprised that the deal would trigger Chemical's handcuff clause because Manufacturers is technically being merged into Chemical.
They also said that few people were aware that the merger of the lead banks would not coincide with that of the holding companies. As a result, some said they expected layoffs in some areas to be delayed.
Several analysts said the belated bank mergers would not affect their projections for the banks' savings or earnings. Though the banks had not previously announced the delay, analysts pointed out that Bank of New York Corp. and Irving Trust Co. delayed their lead bank mergers until more than six months after the companies merged in 1989.