If you have made it as a C-level executive, you have proven yourself as having significant value to your company. As such, it might be time for you to renegotiate your executive employment contract. When you were first hired, the company knew you looked good on paper. Now that time has passed and the company has been successful under your guidance, the terms of your employment, compensation and equity position should be revisited.
If you are wondering why the Board would agree to renegotiate the terms of you CEO package, consider the following reasons:
- The fear that you will leave to work for a competitor
- The expense of recruiting and training a replacement with no guarantee they could perform your job as well as you do
- The disruption your departure could cause to business
- Losing the momentum you created for the company, as well as future successes you could generate
What terms should you re-negotiate?
Review the items that you attempted to negotiate in your original executive employment agreement to see what you wanted but was not included. For example:
- Compensation. Should your base salary be increased? Your salary should be commensurate with the level of performance you have proven to the company. What about the bonus structure? Your bonus should be based on a formula that is realistic to what you have demonstrated you can achieve for yourself and the company.
- Equity. You should renegotiate the percentage of your equity stake in the company, but also the tax-favorable designation that provides you capital gains treatment. Consider including provisions that limit dilution and assurances that your shares will be sold on the same terms as the largest shareholders in the company.
- Severance. When you initially negotiated your executive employment agreement, you probably did not focus on the severance provisions. If not, take the time now to adjust termination provisions, including your right to leave the company if it fails to uphold its promises to you. Negotiate favorable terms for your severance package, including payment of bonuses and accelerated vesting of your equity.
- Restrictive covenants. Review the non-compete, non-solicitation, and non-disclosure provisions in your contract. You want to make sure you can obtain new employment if you decide to part ways with the company.
If you are a CEO considering the renegotiation of your employment contract, our legal team can help. With over 36 years of experience providing sophisticated legal advice on business matters and related litigation, Mailly Law is here to help. With our structure, you work with the same attorney who gets to know your culture and anticipates your legal needs. Contact us today to schedule your initial consultation.