8-KLeadership ChangesExhibits & Filings

Aon plc 8-K Report, Executive Changes (Apr 28, 2009)

Filed April 28, 2009For Securities:AON

Summary

This 8-K filing from Aon Corporation on April 28, 2009, primarily details changes to executive compensation and employment agreements, impacting key named executive officers Andrew M. Appel and Ted T. Devine. The company introduced a new performance-based long-term incentive award, the Aon Benfield Performance Program, designed to align executive rewards with the company's success and retention goals over a three-year period (2009-2011). This program aims to drive overall company performance by basing awards on Aon Benfield's cumulative adjusted segment pretax income. Furthermore, the filing announces amendments to the employment agreements for Mr. Appel and Mr. Devine. These amendments extend their terms of employment, clarify roles and responsibilities, introduce restricted stock unit grants, and crucially, limit the severance payments payable to the company in the event of a termination without cause. For Mr. Devine specifically, the amendment also provides him with the right to terminate his employment for "good reason." These adjustments signal a focus on executive retention and a potentially more defined framework for executive departures.

Key Highlights

  • 1Introduction of the Aon Benfield Performance Program, a new long-term incentive award plan for eligible executives.
  • 2Andrew M. Appel awarded 37,129 target performance share units under the new program, contingent on Aon Benfield's performance from 2009-2011.
  • 3Amendments made to the employment agreements of Andrew M. Appel and Ted T. Devine.
  • 4Key changes in employment agreements include extended terms, clarified duties, and restricted stock unit grants.
  • 5Termination provisions in executive employment agreements have been modified to limit severance payouts in case of termination without cause.
  • 6Ted T. Devine's employment agreement amendment includes a provision allowing him to terminate employment for "good reason."
  • 7The performance metric for the Aon Benfield Performance Program is cumulative adjusted segment pretax income over a three-year period.

Frequently Asked Questions

The Aon Benfield Performance Program is a new, performance-based long-term incentive award plan approved by Aon's Organization and Compensation Committee. It grants eligible executives, such as Andrew M. Appel, target performance share units that will be earned and settled in Aon common stock. The payout is contingent on Aon Benfield's performance relative to a cumulative adjusted segment pretax income target over a three-year period (January 1, 2009, to December 31, 2011). The Committee can adjust performance results or targets for extraordinary items.

The employment agreements for both Mr. Appel and Mr. Devine were amended to extend their employment terms, clarify their positions and responsibilities, and include grants of restricted stock units. A significant change is the modification of termination provisions to limit the severance amount paid by Aon in the event of a termination without cause. Additionally, Mr. Devine's agreement was amended to allow him to terminate his employment for "good reason."

This filing indicates Aon's strategy to link executive compensation more directly to company performance and retention. The Aon Benfield Performance Program incentivizes executives to focus on segment profitability over a multi-year horizon. The amendments to employment agreements, particularly the capped severance and inclusion of restricted stock, suggest a move towards greater alignment of executive interests with shareholder value and a more defined structure for managing executive transitions.

The primary financial implication for Aon relates to executive compensation and potential severance costs. By capping severance payments in the event of termination without cause, Aon is managing potential future liabilities. The performance-based incentives are designed to drive future profitability, which, if achieved, would benefit the company financially. The issuance of restricted stock units represents a form of compensation that will impact equity dilution and stock-based compensation expenses over time.