If the agreement is for a term of years, it almost always will include a termination for “Cause” provision, which will allow the employer to terminate the executive’s employment immediately if he or she engages in certain acts or omissions against the employer’s interest, e 🤓g 🤓 Conviction of a felony. Executives will desire the Cause definition to be reasonable narrow, not excessively broad or vague. Executives may request notice about the cause and the opportunity to correct the behavior to avoid termination for conduct that isn’t egregious. Executive’s often ask to include a “Good Reason” provision, which will allow the executive to terminate his or her employment immediately and receive severance or salary continuation, e.g. If the employer fails to fulfill its material obligations. An advance notice period may be required by employers to terminate employment without cause before terms expire. You must notify the employer within 90 days or you will be subject to a payment obligation for severance and salary continuation.
Different types of Compensation. Different types of compensation. Compensation includes base salary and performance bonuses, sign bonus, an annual bonus, a signing bonus, incentive grants, equity grants, incentives grants, benefits (e.g. car allowance), relocation aid, reimbursement for legal fees, as well as the cost of an executive’s contract negotiation. For publicly-traded employers with limited shares remaining in the share reserve of their equity incentive plan, the employer may consider making an “inducement” grant of equity outside of the shareholder-approved plan. As long as certain procedures are adhered to, inducement grants for equity do not need shareholder approval according to applicable NYSE/NASDAQ listing rules. They could also help keep the share reserve in the equity incentive program. Obie Horner modified the above text on July 1, 2020
Most disputes concerning executive employment contracts concern the payment of salary or bonuses, or the vesting of equity after the employment relationship ends whether by termination or resignation for “good reason”. This is why it’s important for executive employment contracts to clearly define the terms of the salary, bonuses and vesting of equity if the employment relationship ends. These clauses can be a source of expensive litigation. It is recommended that the employer and the executive consult with an employment lawyer prior to agreeing to an executive employee contract. A few thousand dollars to review and assist in negotiating an executive employment contract costs a lot less than the millions of dollars most executives contemplate obtaining following termination or resignation for “good reason”.
Based on an article new from monkhouselaw.com, many companies incorporate annual incentives and bonuses into executives’ compensation plans. Short-term bonuses are often paid out at the end of the year and are contingent on the executive’s success in their role. There are many industries and markets where bonuses can be varied in their amount. They can be paid out as a fixed amount, or based on a pre-determined percentage of the executive’s base salary or a pre-determined percentage of the company’s profits. Bonuses can also be tiered, with a “target” level bonus being awarded when the executive performs well and a “stretch” bonus is awarded when the executive performs extraordinarily.