Business Context and Reporting Period
This Form 8-K filing by Mastercard Inc. (Registrant) and its principal operating subsidiary, Mastercard International Incorporated (Company), was filed on July 29, 2009. The report details the adoption of two new executive compensation plans effective August 1, 2009: the Executive Severance Plan and the Change in Control Severance Plan (CIC Plan).
Key Financial Metrics
This filing does not contain financial performance data such as revenue, profit, cash flow, margins, debt, or liquidity. The document is strictly a disclosure of corporate governance and executive compensation arrangements.
Material Changes
The primary material change is the establishment of new severance protocols for eligible executive officers and employees who do not have written employment agreements. These plans define specific payout structures for terminations due to death, disability, mandatory retirement, "Cause," voluntary resignation, "Without Cause," or "Good Reason," as well as terminations surrounding a Change-in-Control event.
Guidance, Outlook, and Plan Details
Management commentary is limited to the structural description of the new plans. Key provisions include:
- Executive Severance Plan:
- Eligibility: Executive Committee members without written employment agreements.
- Termination Without Cause/Good Reason: Provides 18 months of base salary continuation (discretionary up to 24 months), annual bonus payments equal to 1.5 times the prior year's bonus (discretionary up to 2x), COBRA coverage for 18 months, and outplacement services.
- Conditions: Payments require execution of a separation agreement and release within 60 days, including 18-month non-compete and non-solicitation restrictions.
- Change in Control (CIC) Plan:
- Eligibility: Employees selected by the CEO or Compensation Committee prior to a Change-in-Control.
- Trigger Events: Termination without Cause or for Good Reason within 6 months before or 2 years after a Change-in-Control.
- Benefits: Provides 24 months of base salary continuation, annual bonus payments based on the average of the prior two years, COBRA coverage for 24 months, and outplacement services.
- Conditions: Requires a separation agreement with 2-year non-compete and non-solicitation restrictions.
- Definitions:
- Cause: Includes willful failure to perform, serious misconduct, criminal conviction, breach of confidentiality, or code of conduct violations.
- Good Reason: Includes demotion, material salary reduction (greater than 10%), or relocation of more than 50 miles.
- Change-in-Control: Defined per the 2006 Long-Term Incentive Plan, including acquisition of >30% voting power, board composition changes, or asset sales.
The plans are intended to comply with Section 409A of the Internal Revenue Code and ERISA. The Compensation Committee retains the right to amend or terminate the plans at its sole discretion, subject to restrictions on detrimental amendments within two years of a Change-in-Control.
Investor Verification Checklist
- Verify the specific list of "Eligible Members" and "Eligible Employees" designated in writing by the CEO or Compensation Committee.
- Review the full text of Exhibits 10.1 and 10.2 for complete legal definitions and exclusions not summarized in this filing.
- Assess the potential financial impact of the discretionary components (e.g., extending severance from 18 to 24 months or bonuses from 1.5x to 2x).
- Confirm compliance with Section 409A regarding the timing and calculation of deferred compensation payments.