Siebel Needs to Fortify Growth, Not Employee Benefits

By John Pallatto  |  Posted 2005-06-01 Print this article Print

Opinion: Siebel's attempt to retain key employees by spelling out severance and benefit guarantees in the event of a takeover won't work unless the company also manages to get back on track toward consistent growth.

Its hard to focus on building a business when you are constantly hearing rumors that your companys future as an independent concern may be measured in a few months or even weeks. Thats the situation Siebel Systems, a producer of CRM (customer relationship management) software, is dealing with as it tries to plan future product enhancements and get back on a consistent growth path. Rumors that Siebel is a buyout target or that it was actively seeking a buyer have been circulating for months.
Those rumors reached a crescendo in April after CEO Michael Lawrie resigned as CEO under pressure from the Siebel board of directors after less than a year on the job.
More recently, Eileen McPartland, Siebels senior vice president of global services, a division which had been a key revenue generator for the company, resigned in May. To top it off, Carl Icahns holding company is reportedly a minority Siebel shareholder. Despite his interest and the buyout rumors, Siebels share price, which topped $100 per share in late 2000, has been stuck in the doldrums trading between $9.50 and $8.50 for most of the year. Employees see temptations beckoning outside the company as well. The Silicon Valley economy has improved along with the rest of the country, making good jobs more plentiful and making it easier for Siebel employees to move on. So what is a company to do under such certain conditions? For Siebel, the answer was to set up an employee retention plan that would ensure that four different employee classes would receive specific severance benefits if the company was sold or taken over. Under the retention program, a total of 5,260 employees would be eligible to receive severance benefits for a term that begins "three months prior to a change of control and ends one year following a change of control," according to a Form 8-K statement filed with the U.S. Security and Exchange Commission. Click here to read how Siebel is pressing on with its product plans despite the recent management shakeup and persistent buyout rumors. Any covered employee would receive cash payments equal to three to 18 months base salary, and target annual bonus and commissions depending on the employees title and position if they were terminated as a result of a corporate acquisition or takeover, according to the statement. Health and welfare benefits would continue for three to 18 months after termination due to a takeover and there would be an "immediate acceleration" of all unvested stock awards held by employees. Siebel would also remove any holding periods for any stock awards held by employees. Next Page: The quest for growth.

John Pallatto John Pallatto is's Managing Editor News/West Coast. He directs eWEEK's news coverage in Silicon Valley and throughout the West Coast region. He has more than 35 years of experience as a professional journalist, which began as a report with the Hartford Courant daily newspaper in Connecticut. He was also a member of the founding staff of PC Week in March 1984. Pallatto was PC Week's West Coast bureau chief, a senior editor at Ziff Davis' Internet Computing magazine and the West Coast bureau chief at Internet World magazine.

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