It’s a fact of life that key executives of public companies come and go—with increasing frequency and in sometimes messy circumstances. Although the headline economic terms of an executive’s compensation and severance usually get the media spotlight, the more technical provisions in these arrangements, such as restrictive covenants, compensation clawback provisions, and release and waiver terms, can also significantly affect how an executive’s departure unfolds.
Just as levels and types of compensation must evolve with the market, these provisions should reflect current events, changing governance practices, and legal developments such as the Dodd-Frank Wall Street Reform and Consumer Protection Act. Negotiating these provisions can also involve tradeoffs against the economic terms. Compensation committees and their advisors who find themselves in difficult negotiations with an outgoing executive should be well informed about the relative costs and benefits of these provisions and not dismiss them as boilerplate.
Post-Termination Provisos
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