What Should You Seek in Your Retention Contract?

If you are a CEO, CFO or some other key executive interested in negotiating a retention agreement with your employer, it is important to know what terms are the most important.

The first place to start is to review your original employment agreement. When you initially took the job, you were most likely not in a position with a lot of leverage to negotiate. Now that you have proven your value with your employer, you are in a much better position to negotiate your retention contract. Additionally, you possess insider knowledge about your company, its financial position and your contribution to its future success. Below are a few of the elements a retention package should include:

  • A signing bonus and raise in salary
  • Changes to your level of the executive’s bonus
  • Revisions to non-compete provisions or other restrictive covenants
  • Award of base and incentive equity (stock options, RSUs, ISOs) with favorable tax capital gain tax treatment where possible
  • Any necessary changes to severance terms to make more favorable to you, including severance payment including your base pay, bonuses, benefits and equity
  • Add provisions to avoid or minimize (to the extent possible) exposure to excise tax on your total compensation package

In addition to the above list, there are other elements you may want to consider negotiating while you have leverage. In preparing for negotiating your retention agreement, you should analyze what the cost of your retention package is compared to the significant economic value your continued employment provides to the company. You want to demonstrate that the retention contract is a “win-win” for you and your company.

When it comes to retention agreements, negotiation is crucial. Whether you are an executive or an employer considering a retention compensation package, let our knowledgeable and experienced attorneys assist you in negotiating the best possible terms for you. Contact our office today to schedule a consultation.