Posts Tagged ‘executive’
How is it possible that Yahoo hired its CEO Scott Thompson, missing the fact that he misrepresented his credentials – to wit, he claimed to have a degree in computer science when he did not?
How is it possible that one of the nation’s leading top executive search firms did not uncover this fact during its due diligence on behalf of Yahoo?
The critical concept in the negotiation for the renewal of an executive employment contract is LEVERAGE. The answers to the following questions will determine if the individual has leverage in renewal negotiations. How valuable is the individual to the enterprise? What is the executive’s track record, either there or at prior companies? What has been offered to the executive or the person in the same position in the past? What are the comparable packages in the industry? The executive should keep in mind the words of Mahatma Gandhi; “if you don’t ask, you don’t get.”
Credit Suisse and Bank of America both recently announced changes in their annual bonus arrangements. Given the state of the economy and the cash crunch that many business are facing, companies are becoming more creative in the funding of these bonus arrangements – with a greater portion of annual bonuses are being funded in restricted stock or other investment vehicles. While these arrangements can sometimes provide a potential benefits to their recipients, knowing the details is critical. Credit Suisse’s arrangement, for example, offers no upside to the executives and could theoretically (according to the Wall Street Journal) result in lower payouts. Stock grants provide both potential increases and decreases in value, but often such shares are “restricted,” meaning that executives cannot sell these shares if things go bad and deferred stock arrangements can have unintended income tax liabilities associated with them. As bonus arrangements become more complex and creative, executives will need to engage in more planning – financial, cash flow, and income tax – to properly manage their incentive compensation.
David Harmon co-authored this post with Charles Bruder.
IN THE NEWS: What’s the Impact of Compliance with Post-Employment Obligations on Severance Agreements?
What does the dispute between MacAndrews & Forbes and Donald Drapkin, its former Vice Chairman, indicate to other executives who sign severance agreements? That company property should be returned and confirmation of such return should be obtained by the executive, that companies should have solid procedures in place to monitor the possession of confidential information by employees, and that post-employment obligations are enforceable — depending on how they are drafted and the particular facts of the case. This case should be interesting as it presents specific contract clauses and evaluates the conduct of the former executive. We will see what the jury finds regarding whether the company was justified in withholding payment under Drapkin’s severance agreement due to its claim that he failed to comply with his post-employment obligations, including returning company property and soliciting an employee.
Great title for the Wall Street Journal‘s article “Wall Street Pay Gets Even Trickier to Figure” — executives be wary as company consider modifying deferred comp arrangements. If not done properly, IRS Code 409A liability can be triggered with the executive bearing the unintended financial responsibility.
This post was co-authored by Charles A. Bruder, a Member of Norris McLaughlin & Marcus and Co-Chair of its Executive Compensation & Employee Benefits Group. Charles is experienced in all aspects of defined contribution and defined benefit plans, deferred compensation arrangements, stock option plans, employee stock ownership plans, and other incentive and equity-based compensation arrangements.