Companies of all sizes want to attract and retain top-shelf talent at the c-suite level to get the competitive advantage they need to grow and thrive. In turn, experienced and sophisticated executives expect to be compensated for their efforts in a way that exceeds or at least matches what they could get elsewhere.
But those aren’t the only concerns that hang in the air as company and executive try to reach a mutually beneficial compensation arrangement. Businesses don’t want to set an expensive precedent for future hires or offer an executive compensation package that raises concerns among shareholders or regulators. Executives don’t want to shortchange themselves or limit the upsides that they could gain for their hard work and success.
Negotiating and crafting an executive compensation package that addresses all of these motivations require a unique skill set. Deft negotiating abilities, a thorough appreciation of the market and industry in which the parties are holding their discussions, and an understanding of the financial, legal, and tax implications of the multitude of elements that comprise compensation packages for executives are indispensable.
At Siegel & Dolan, our executive compensation attorneys bring all of those skills along with 70 years of combined employment law experience to our representation of high-level executives engaged in important compensation discussions.
We take a holistic approach to the review, negotiation, and drafting of executive compensation packages. We start with genuinely getting to know our clients and the concerns, expectations, and objectives they come to the table with.
From there, we review proposed arrangements to see whether and where they align with the client’s interests and whether and where they contain hidden risks or restrictions on future compensation or opportunities. Working as a team, we then advance our client’s position to reach an agreement that marks the start of a prosperous new business relationship.
Executive compensation is the term used to describe the compensation package a senior executive receives. It encompasses employment contracts, wages and benefits, stock options, severance packages, non-compete agreements, and confidentiality agreements.
An executive compensation package protects the executive’s position by restricting the reasons the employer can use to terminate the executive. Moreover, an executive compensation employment agreement often details both the terms and conditions of employment as well as the company’s and executive’s post-employment responsibilities.
Aside from detailing an executive’s title, responsibilities, and authority, executive compensation agreements typically provide for a specific period of employment. Generally, such an agreement will state that once the period of employment ends:
- the contract terms will automatically renew if there was no termination; or,
- the executive will be terminated or continue his or her employment on an at-will basis.
The types of compensation often included in arrangements for high-level executives are varied, and many are contingent on future events and benchmarks. All of these elements can raise complex legal and tax implications which need to be considered in evaluating the wisdom and advisability of proposed arrangements.
Typically, an executive compensation package will include some or all of the following:
- Base salary;
- Short-term incentive pay and bonuses, including the conditions or performance markers that need to be met and the schedule upon which bonuses will be paid;
- Long-term cash-based incentive pay;
- Long-term equity-based compensation including:
- stock options
- restricted stock
- stock appreciation rights;
- Deferred compensation agreements;
- Supplemental Executive Retirement Plan (SERP) information;
- Health, life, and long-term disability insurance
- Perks and incidental benefits
- Severance package
- Non-competition, non-solicitation, and confidentiality provisions
- Relocation package
Executives need to be mindful of the tax consequences and securities laws when negotiating compensation arrangements. Moreover, due to many states’ corporation and executive compensation laws, the fiduciary duties of a company’s board may conflict with the executive’s objective of negotiating a reasonable rate of compensation.
When you retain Siegel & Dolan as your counsel, we will review, address, and fully explain these issues with clarity and common-sense. You’ve worked hard to put yourself in your current position. We will work equally hard to ensure that you get the rewards you deserve.