Business Context and Reporting Period
Company: Emerson Electric Co.
Filing Type: Form 8-K (Current Report)
Date of Report: August 31, 2005
Subject: Termination and transition of split dollar life insurance agreements with the CEO and four other highly paid executive officers (Named Officers) to comply with Section 402 of the Sarbanes-Oxley Act of 2002.
Key Financial Metrics
This filing does not report revenue, profit, cash flow, margins, debt, or liquidity metrics. It focuses exclusively on executive compensation arrangements.
- Substitute Policy Coverage: $200,000 per Named Officer.
- Annual Premium Cost: Less than $5,000 per policy.
- Premium Payment Responsibility: Company will pay premiums for the substitute term life insurance policies as long as the Named Officer remains an employee.
Material Changes Versus Prior Period
Termination of Split Dollar Arrangements: As of August 31, 2005, the Company terminated existing split dollar life insurance agreements with Named Officers. This action was taken because Section 402 of the Sarbanes-Oxley Act prohibits loans to executive officers, which some interpretations extend to certain split dollar policies.
Transition Program: The Company suspended subsequent premium payments and withdrew previously paid premiums under the old policies. Named Officers elected to convert their coverage to ongoing term life insurance policies rather than canceling for cash value.
Guidance, Outlook, and Risks
Management Commentary: The transition was implemented to eliminate the split dollar arrangement while maintaining life insurance coverage for Named Officers. The new structure involves the Company paying premiums for term policies with reduced coverage amounts compared to the original split dollar arrangements.
Risks and Contingencies: The filing addresses regulatory compliance risks associated with the Sarbanes-Oxley Act. No other material risks, contingencies, or unusual items are disclosed in this report.
Important Facts for Investors to Verify
- Confirmation that the transition to term life insurance fully satisfies Sarbanes-Oxley Section 402 compliance requirements.
- The total aggregate cost to the Company for the new term policies (less than $5,000 annually per officer).
- Whether the reduction in coverage from the original split dollar policies to $200,000 term policies impacts executive retention or compensation competitiveness.
- Details regarding the withdrawal of previously paid premiums and any tax implications for the Named Officers.