As Boston executive advocacy lawyers, we are experienced in negotiating the many facets of executive employment contracts. From compensation to exit plans to post-employment restrictive covenants, the details matter.
Although often the focus, salary or base pay is just one component of an executive’s pay. With the rise in performance-based compensation, short-term and long-term incentive plans increasingly comprise a large portion of an executive’s total potential compensation. From cash bonuses to equity awards – including options, restricted stock units (RSUs), phantom stock, stock appreciation rights (SARs) – variable compensation can take many forms. Vesting schedules, whether on a cliff, uniform, or graded basis, must also be examined in evaluating an executive's compensation package.
Beyond compensation, exit planning is essential, as the next company may not be the one at which you spend the rest of your career. Even if never utilized, having an exit plan provides peace of mind. Severance payout triggers where one is terminated without “Cause” or where forced to resign with “Good Reason” are hallmarks of a robust executive employment contact. Of course, negotiating the definition of these terms will determine their effectiveness. In our experience, for example, many employment contracts initially attempt to grant discretion to discharge an employee after a certain period of incapacity without triggering a severance payout. As found in Gracia v. Northeastern University, however, such rigid medical leave of absence policies may violate state and federal law.
Finally, maintaining continuity in your career should not be overlooked. If not properly tailored, restrictive covenants – which include non-compete clauses, non-solicitation provisions, and anti-poaching terms – can cause an executive to unnecessarily forfeit key opportunities. Suffice to say, the length of such restrictive covenants must be narrowly tailored and balanced against the opportunity cost. Like other terms, such clauses are negotiated wholistically in the context of the entire agreement. An employer’s insistence on a broader non-compete provision, for example, may result in greater severance pay or overall compensation.
Overall, negotiating an executive employment contract requires a delicate balance. Certainly, the contract must fairly reflect one's value to the company. At the same time, maintaining good will throughout the negotiation process is vital to preserving the strength of the relationship. Put simply, the approach taken in negotiations is equally as important as knowing the terms that an executive employment contract should include.
As attorneys concentrating in employment law located in the heart of Boston, we look forward to meeting with you and sharing our executive advocacy expertise.Executive Advocacy: Learn More