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(Reuters) - Time Warner Cable Inc, being circled by potential buyers, could pay out more than $50 million to incoming Chief Executive Robert Marcus as part of his contract, if the company is bought while he is CEO and he gets replaced.
Marcus, 48, is set to take over the top job at the No. 2 U.S. cable company from Glenn Britt on January 1 as takeover speculation surges.
For Marcus to receive the money upon his departure, Time Warner Cable would have to see a change in control from "an applicable merger, acquisition, sale or other agreement," once he is CEO, according to an employment agreement outlined in a regulatory filing.
If he makes way for a new chief, Marcus would receive three times his base salary of $1.5 million and three times his $5 million annual bonus, which equals $19.5 million.
Marcus would also be entitled to stock options accrued over his time at the company. Based on Time Warner Cable's closing price of $136.56 on Tuesday, Marcus would be able to cash out of roughly $37 million in stock, according to a proxy filing. That would bring Marcus' total payout to about $56.5 million.
A change-in-control agreement is common in employment contracts for CEOs, according to Daniel Laddin, a partner at Compensation Advisory Partners, which consults on executive compensation. The provision is designed to provide financial security to executives so they would be open to a deal without being worried about being out of a job, he said.
"This change-in-control provision is fairly typical. What's the unusual circumstance is to have an incoming CEO announced already, while a company is in a play," Laddin said.
The "golden parachute" for H.J. Heinz CEO William Johnson, for example, was set at about $56 million in March after the ketchup maker's acquisition by Berkshire Hathaway and 3G Capital.
In another instance, Nokia CEO Stephen Elop received an 18.8 million euro ($25.5 million) termination payment after he negotiated the sale of its handset business to Microsoft Corp.
Charter Communications Inc and top cable provider Comcast Corp are examining a joint bid for Time Warner Cable, according to reports. Time Warner Cable has been an acquisition target for John Malone, chairman of Liberty Media Corp, Charter's biggest shareholder, since the summer.
Earlier this year, Liberty's offer for the company was rejected because it was not viewed as beneficial to Time Warner Cable shareholders, Reuters has reported.
A Time Warner Cable spokesman declined to comment.
Time Warner Cable shares have increased 41 percent year to date, outpacing the S&P 500 index, largely due to the recent speculation of a takeover. This has been a major boost to Marcus' equity and the value of his pay package.
"The big numbers are really a function of the stock price having done so well, and at the end of the day the shareholders are benefiting as well," Compensation Advisory Partners' Laddin said.
If the company is sold this year before Marcus becomes CEO and he leaves, he would pocket $10.5 million in severance, and the same $37 million in stock options, which totals $47.5 million.
Marcus was named the incoming chief in July. He was promoted to chief operating officer and president in 2010, five years after he joined the company. Marcus started his career as an attorney focused on mergers and acquisitions.
Reporting by Liana B. Baker; Editing by Christian Plumb and Jeffrey Benkoe