Robert Kelly may have been unceremoniously booted out of BNY Mellon, but at least he'll be treated royally, financially speaking.  That's because he stands to collect tens of millions of dollars on his way out as chief of Bank of New York Mellon, a figure unlikely to be dented by a successful shareholder initiative last year that sought to limit executive severance at the company.
 

For the record, the bank said Wednesday that Mr. Kelly was stepping down because of “differences in approaches to managing the company.”

The company isn’t expected to disclose how much Mr. Kelly will receive in severance for at least a day or two, but the sum is likely to hinge on how his departure is characterized for contractual purposes. That determination typically reflects negotiations between lawyers for each side as much as any underlying reality.

Notwithstanding his bruised ego, Mr. Kelly could be eligible for as much as $37 million in cash, stock and continued benefits if his departure is considered a termination by the company without cause.  And it's likely those terms are applicable, because Mr. Kelly’s employment, as with most executive contracts, largely limits cause to serious infractions like dereliction of duty or conviction of a crime.

Mr Kelly apparently was eased out of the job by BNY's Board and thus is considered to have quit for “good reason” - a category that generally includes involuntary demotion or pay cuts,  As a result, he could receive as much as $20 million.  A simple resignation, rarely seen when executives are forced out over company performance, would bring Mr. Kelly about $5.5 million from faster vesting for some equity awards.

Pension Collections.  Separately, Mr. Kelly is eligible to collect a pension that was valued at more than $15 million as of 12/31/10.  Last year, the company’s shareholders approved by a wide margin a proposal intended to rein in executive severance payouts.  Soon after, the company’s board adopted a policy reflecting the proposal.  And in March, BNY Mellon executives signed on to a severance plan incorporating the new restrictions, which limits severance to 2.99 times annual salary and bonus. Based on Mr. Kelly’s 2010 compensation, that would appear to limit his payout to nearly 20 million.

But it is unlikely to make much difference.  That’s because the policy applies the limit only to cash severance payments, consulting fees and some perks and pension sweeteners.  It ignores payouts from improved terms for stock or option awards, post-employment medical benefits and payments made to settle potential legal or other claims, among other payments.

Based on disclosures in the company’s March proxy filing, much of Mr. Kelly’s payout is likely to come from accelerated vesting for stock and option awards:  $5.5 to to $14 million, depending on how his departure is classified.  Another $15 million would come from pension sweeteners, and at most $8 million would be in cash.  He's also eligible for 2 years of company-sponsored health care, which doesn’t count against the limit, and a year of job-hunting services.   [DealBook, 9/1/11]