Siebel drafts retention plan to keep staff amid rumours

Siebel Systems Inc. has adopted a set of employee benefits plans guaranteeing its workers severance payments and continued health-care coverage if the company is acquired, a move Siebel said is necessary to retain employees amid widespread speculation about the company’s future.

Siebel revealed the new plans, which took effect May 20, in a regulatory filing on Thursday. “Recent rumours concerning potential acquisitions or takeovers of the company have created a great deal of uncertainty among the company’s employees and executives, which could negatively impact employee productivity and company performance,” the filing says. “If this issue is not addressed, particularly with regard to key employees and executives, the company believes it could adversely affect the company and its stockholders.”

Siebel’s fate has been a subject of intense Wall Street speculation in recent weeks. The company has a large base of customers using its customer relationship management (CRM) software, but has struggled over the past few years to grow during a period of sluggish enterprise software sales. With little debt and more than US$2 billion in cash on hand, it presents an attractive acquisition target — if a suitor can be found who is willing to bid more than the US$4.8 billion market valuation Siebel currently commands.

Rumours the company is on the block increased after the abrupt dismissal last month of Chief Executive Officer (CEO) Mike Lawrie, who held the job for less than a year before being a forced out by a board unimpressed with his progress in turning the company around.

Siebel’s executives routinely decline to comment on whether the company is entertaining takeover offers, and new CEO George Shaheen says he’s drafting a long-term strategy for Siebel. Still, the company took the unusual step earlier this month of issuing a disclosure statement addressing the persistent rumours and the subsequent heavy trading of Siebel’s stock.

“Potential opportunities have recently been presented to us that continue to be evaluated and discussed in a manner that is consistent with our past practices and the fiduciary duties of our officers and directors,” Siebel said in a May 4 regulatory filing. “There are none under current consideration that have progressed to the point at which the full board of directors has met to consider them. We undertake no obligation and do not intend to make any further announcement regarding the exploration of potential strategic opportunities, except as required by law.”

Siebel’s new retention plans guarantee workers cash payments of three to 18 months (the duration depends on the employee’s title and position) of base salary and target bonus, along with three to 18 months of continuing health care and other benefits. It also guarantees immediate acceleration of unvested stock awards and removal of holding periods on stock awards. Essentially all of Siebel’s 5,200 employees are covered by the plans.

The plans’ trigger is a change in control of more than 50 per cent of Siebel’s shares. A shareholder revolt installing new members on Siebel’s board of directors could also trigger it: One clause defines a “change in control” as a change within the next two years in Siebel’s board composition so that Siebel’s incumbent directors no longer form a majority.

Siebel adopted four different retention plans, separately covering senior executives, vice-presidents, directors and lower-ranking staffers. The plan benefits kick in if an employee is terminated during a period running from three months before to one year after a change in Siebel’s control.

Related links:

Oracle buying Siebel a no-go

New Siebel CEO to receive US$1 million annual salary

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