WSH

As Towers Watson & Co. was negotiating a merger earlier this year that would later cause its stock to fall, Chief Executive John Haley netted nearly $10 million from selling the consulting company's shares.

In early March, when merger talks were under way between Towers Watson and insurance broker Willis Group Holdings PLC, Mr. Haley exercised 106,933 stock options and sold the underlying shares for a $9.7 million profit, according to regulatory filings. The sale was Mr. Haley's first in more than a year and shed 55% of his stake in Towers Watson, which he has expanded into a professional-services powerhouse whose shares have risen 156% since 2010.

When the roughly $9 billion deal was announced on June 30, Towers Watson shareholders criticized it, sending the Arlington, Va., company's stock down nearly 9% that day. Their beef: the deal's price tag, which valued Towers Watson at $125.13 a share, or about 9% less than the prior day's close. Some of them groused that the big winner from the rare, so-called takeunder was Mr. Haley, who would be CEO of the combined company even though his shareholders would own a minority.

Mr. Haley declined to comment through a spokesman. A person familiar with the situation said the trades took place early in the merger talks and were cleared by Towers Watson's legal team. Mr. Haley doesn't have a 10b5-1 plan, which allows executives to preschedule transactions for certain times or price triggers.

"This deal destroys shareholder value," said Matthew Schoenfeld, an assistant portfolio manager at Driehaus Capital Management LLC, a Towers Watson investor that has urged shareholders to reject the merger.

Such complaints have escalated as Towers Watson shares have continued to slide and as shareholders have learned of Mr. Haley's preannouncement trading. Another aspect of the deal that has raised concerns among some shareholders is the timing of its announcement. Towers Watson's directors are each given $130,000 in stock awards annually, priced at the close on the last day of the company's fiscal year, which ends June 30. By announcing the transaction that day, the directors, including Mr. Haley, received 9% more shares than they would have otherwise.

Kevin Murphy, an executive-compensation expert and professor at USC Marshall School of Business, said Mr. Haley's March stock sale is unusual and such moves tend to not go over well with investors. "Certainly, as a shareholder, you want to see a CEO that has skin in the game," he said. "You want to see them standing behind" transformative moves like mergers, he said.

Mr, Haley took the helm in 1999 of what was then called Watson Wyatt Worldwide and oversaw a string of smaller acquisitions before striking the 2010 merger with consulting firm Towers Perrin Forster & Crosby Inc.

But Mr. Murphy said many other aspects of Mr. Haley's compensation are notably shareholder-friendly. For example, he has no "golden parachute" that kicks in when there is a change in control of the company.

Mr. Haley and his counterpart, Willis CEO Dominic Casserley, met in London in January, where Mr. Casserley floated the idea of a combination. By late February, the two men had set out a framework for talks with key executives, an August regulatory filing shows.

Towers Watson shares are down 13% since the deal was announced. They closed Wednesday at $120.16, about 4% higher than the value of Willis's offer, suggesting some shareholders are betting on a price bump. "It's no secret that some investors aren't thrilled with the terms," said Timothy McHugh, an analyst with William Blair & Co.

He added that Mr. Haley "has a pretty strong track record, including moves many people were skeptical of" that later turned out well, like the 2012 purchase of Extend Health Inc. That business formed the core of what is now Towers Watson's fast-growing OneExchange, which operates private health-insurance exchanges.

The deal must receive a majority of support from Towers Watson shareholders—not a sure thing. Typically in mergers, the shareholders giving up control are compensated with a premium price for their stock.

Towers Watson shares have traded above the offer price for much of the past two months, meaning many investors have a financial incentive to vote against the current deal.

Executives of the companies say a combined Willis Towers Watson, as the Irish company would be called, would be able to increase revenue by cross-selling business customers on a wider swath of products and services, from retirement consulting to risk management.

The deal is also expected to reduce the effective tax rate on Towers Watson's revenue, which would create additional savings.

If it goes through, Mr. Haley would become CEO of a professional- and financial-services giant with 39,000 employees in 120 countries, $8.2 billion in annual revenue and earnings before interest, taxes, depreciation and amortization of $1.7 billion a year.

Write to Liz Hoffman at liz.hoffman@wsj.com

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(END) Dow Jones Newswires

September 23, 2015 20:45 ET (00:45 GMT)