Executive Compensation
Our lawyers have many years’ experience reviewing executive compensation agreements of all types. We can advise on a wide range of plans and arrangements including:
Executive Employment Agreements
The best time to negotiate the most favorable employment terms is when you are being hired. Our knowledgeable employment law attorneys will review your agreement and assist you in negotiating the terms of your base salary and benefits, sign-on bonus, performance-based bonuses, equity awards such as RSUs, and other incentives. We will think through with you often overlooked issues such as your severance rights, what happens if there is a change in control, and your right to resign without prejudice for “good reason.” If you are being awarded equity, you will want to have a clear understanding of how your interests vest and your anti-dilution rights. Our skilled team will also provide counsel on critical post-employment issues such as covenants not to compete, non-solicitation prohibitions, and non-disparagement clauses. Together we will develop a successful negotiation strategy that permits you to take full advantage of your new opportunity. We have litigated many employment agreements and negotiated hundreds of executive contracts. With this insight, we are ready to assist you with practical advice on how best to improve the terms of your employment.
Executive Severance Packages
If you are faced with the possibility of losing your position, you will want a knowledgeable advocate on your side. Our team can assist you in negotiating a favorable severance package that protects your economic interests and provides you with stability while searching for your next opportunity. We will carefully vet your employer’s proposed severance agreement and alert you to its pitfalls while also providing practical revisions that introduce balance to these often-one-sided agreements.
Equity Compensation Provisions
If you are founding a new business or joining a start-up, your equity share is likely to be the most significant component of your compensation. Equity compensation includes stock grants, stock options, stock appreciation rights, and restricted stock units. Understanding your equity compensation, including the relevant vesting period, exercise price, dilution rights, and other key provisions will shed light on what you can expect as your “real”compensation. Our lawyers have the knowledge and experience necessary to negotiate equity plans that are written in your favor.
Employee Stock Options
If you are offered stock options as part of your compensation, our dedicated team of lawyers can help you understand these options and their potential value. We can also help you negotiate favorable terms regarding these options, such as having a shorter vesting period or a lower exercise price, allowing you to take full advantage of the stocks sooner and on more favorable terms. We will work closely with you to structure a stock option that is tailored to your needs and objectives.
Long- and Short-Term Cash Incentive Bonuses
Long and short-term cash incentive plans award employees with enhanced compensation if they achieve certain performance objectives. Short-term plans typically focus on accomplishments made in a single fiscal year, while long-term plans typically are based on achievements over a three-year window. Experience has shown that these incentive plans work best when the performance objectives are reasonable, detailed, and mutual. At their best they serve to better align your interests with the interests of employers and shareholders. As an employee you are motivated to achieve agreed upon performance objectives and your employer and its shareholders benefit from the enhanced value of their business. We can assist by helping you define and negotiate a plan that has clearly defined metrics and stepped incentives that will award you for your true value added.
Deferred Compensation Provisions
A deferred compensation provision allows you to earn compensation, but defer its receipt until the next taxable year. It may include deferment of incentive compensation, an annual bonus, a contingent benefit, or an equity award. Such agreements are often designed to help minimize your tax liability, but they must be carefully crafted to assure compliance with Section 409A of the Internal Revenue Code. For example, your employer should not retain the right to deny or reduce your deferred compensation, or it will not qualify as deferred compensation and penalties may be imposed. Our experienced lawyers can prepare or review your agreement and recommend any changes necessary to protect your interests.
Phantom Stock Rights
Phantom stocks provide executives with many of the benefits of stock ownership without there being a stock grant. The value of the phantom stock tracks the company’s stock price and provides you with a portion of the appreciation. As phantom stock is not “real” stock, employers do not have to follow the complex rules and regulations that govern the issuance of stock or dividend payments. Our team can suggest when phantom stock rights are appropriate.
Change in Control Agreements
If a merger or sale may lead to the termination of your employment, a single or double-trigger change in control agreement should activate your severance package, enhance your award (e.g., accelerating the vesting of stock interests), and address reducing the future impact on your post-employment covenants. Our knowledgeable lawyers can help you plan for such a transition and leverage a change in control to reduce your post-employment covenants and enhance your severance package.