Executive Employment Contract Negotiations
The employment attorneys at Mansell Law have substantial experience in negotiating executive employment contracts. Negotiating executive employment contracts is an art and can be rewarding—two parties entering into a relationship with a positive view toward the future. But the two parties must also identify and address the downsides, the potential that the relationship will end, and focus on the economics of a successful relationship and departure. Here are some common areas where our executive contract attorneys can provide benefit.
ELEMENTS OF COMPENSATION
Types of Compensation.
Compensation has various elements, such as base salary, discretionary and non-discretionary bonuses, signing bonus, equity grants, long-term incentive compensation, grants, benefits, relocation assistance and reimbursement of legal fees the executive incurs in negotiating the executive contract.
Amount of Compensation.
Knowing the competitive market is key because the best compensation package falls within the window of “not too much” and “not too little.” Studies based upon industry, revenue, geography and job title can provide helpful information on market pricing.
FORM OF EQUITY AWARDS
Assuming the parties intend to incorporate equity awards as part of the compensation package, determining what form/type of equity award will depend upon whether the parties intend to structure performance incentives, share in ownership, maximize capital gains and defer income recognition, among other objectives. The goal of the parties should dictate the form of award.
SEVERANCE AND EMPLOYMENT TERMINATION EVENTS
Termination Events.
Most executive contracts address termination of employment by the employer under various scenarios, such as for “Cause” and “without Cause.” An executive may also be entitled to severance if he or she terminates employment for Good Reason, Disability, Death or other specified events. As to Cause, should the executive have the opportunity to cure the Cause condition before being terminated? What is the definition of “Cause” used in the contract? The answers to these questions may be the most important part of the executive contract.
Severance Pay.
Ideally, severance packages should be designed as “bridge pay,” acting as a bridge until your next job. The amount of severance pay should depend upon the executive’s position. Severance may be paid in a lump sum, over a period of time (allowing the employer to enforce restrictive covenants), or in payments subject to offset for any income received from the terminated executive’s new employer. Generally, a departing executive must sign a release and waive all known and unknown claims against the employer in order to receive any severance pay.
CONCLUSION
Executive employment contracts have a lot of moving parts and each one is unique. By focusing negotiations on key economic terms, the employer and executive may increase the value of the arrangement to both parties, build for a stable relationship and retain executive talent into the future. Contact the executive contract lawyers in Columbus, Ohio for assistance negotiating your executive contract as a executive anywhere in Ohio.