Negotiating executive compensation packages is a complex process. While many people focus on negotiating the salary and bonus components, it is essential to consider other valuable parts of the package. The package may include base salary, short and long-term incentives, benefits, perks, job duties, and severance pay. Senior executives are expected to take on many responsibilities and add substantial value to the company.
The Role of a Law Firm
A law firm like Sunder Legal is organized around a group of lawyers who share clients and profits. Traditionally, law firms were partnerships, but today they may be collected in several ways. These include sole proprietorships, general partnerships, professional corporations, and limited liability companies. These organizations vary in size and jurisdiction, but all serve to offer legal services for a broad range of clients. They also tend to specialize in a particular area of the law (e.g., patent law, labor, employment law, tax law) to increase marketability and revenue. A law firm may also experience mergers, acquisitions, and reorganizations as business and practice areas change. These transitions can profoundly affect a law firm’s focus, organization, and resources.
The Lawyer’s Role
The role of a law firm in negotiating executive compensation packages is to ensure that the terms and conditions are in the employee’s best interests. These agreements can significantly impact the future of an executive and the company they work for. This is an ethically-challenging task. During negotiation, the lawyer must protect his client’s interests by avoiding false statements to facilitate a favorable agreement. In addition, the lawyer should keep the client informed of any communications from opposing counsel, especially when a serious offer is made. A lawyer should also keep the client apprised of the status of a matter until it has been decided whether or not to accept a request if one is offered. Generally speaking, a good lawyer will place his clients first on the issues of utmost importance. This will help the parties negotiate in the most objectively essential areas.
The Executive’s Role
Executives often assume significant responsibility and provide substantial value to the company. Their compensation packages include a broader range of benefits than average employees and a more robust array of incentives, including stock options and cash bonuses based on measurable KPIs. Clients must be guided in the strategic drafting, structuring, and negotiation of equity-based compensation arrangements; employment, severance, change in control, bonus and retention agreements; non-qualified retirement and deferred compensation plans; SERPs and other perquisites to executives. These agreements are designed to protect the interests of both the executive and the company. This is achieved through provisions such as “golden handcuffs,” which stipulate that an executive will be paid out a certain amount of money, property, stock option, or pension proceeds after staying with the company for a pre-determined period.
The Employer’s Role
Executives often need the assistance of a law firm in negotiating their employment contracts. The employment agreement can include the executive’s base salary, annual bonus provisions, signing bonuses, equity awards, perquisites, and participation in employee benefits plans. The employer’s perspective on these issues is critical in determining how these provisions are structured. It should decide how much discretion it wants to retain in granting bonuses over the term of the employment agreement. It should also choose how the executive’s performance will be measured to determine the bonus or other compensation award amount. The terms of an award should be carefully negotiated so that the executive does not receive a large lump sum that he may be unable to manage. Executives also need the assistance of a lawyer in negotiating their compensation packages when they join a new company or are terminated. These negotiations may involve allowing unique executive benefits, severance pay, and non-compete agreements.