Monday, November 11, 2013

Things No One Tells You: 5 Things to Always Get In Writing in Your CEO Agreement!

By Virgil R. Carter

Want to be a CEO?  Already a CEO, but switching jobs?  Here are five components of your employment agreement that are important to consider and that no one else may tell you:

  1. Duties:  Are the roles, duties, title and authority of the CEO clearly stated?  Is it clear the CEO is singularly responsible for staff, budgets, contracts, and other essential annual business operations?  Can these be changed, and if so, by whom and how?  Are changes (change of duties, change of role, title or authority, reorganization, merger, acquisition, cessation of operations, etc) considered as termination for good reason (see termination below)?
  2. Compensation, benefits & annual review:  What is the base compensation?  What are the types of variable compensation, e.g., bonus, commission, deferred compensation, etc.?  Are other types of compensation appropriate, e.g., one-time (moving, relocation, etc.) and/or recurring (car, travel, business club, etc)?  Will compensation be established and maintained as “market rate” and how will market rate be determined annually?  Does the association’s standard benefits package apply to the CEO?  Who participates in these annual recurring decisions?    How is annual performance planning and evaluation conducted?  Who leads the annual review process?  Who participates in the process?  Is the CEO annually at the mercy of only a single volunteer or a balanced group of senior volunteer leaders? 
  3. Term & renewal:  Is there a reasonable initial term of employment?  When and how will the initial term be extended or renewed?  Is there annual compensation if employment is terminated before the initial term of employment has expired?  Who participates in these decisions?  What if there is no formal action to renew the term of employment—does it renew automatically, or is it considered involuntary termination?
  4. Termination:  How will unfavorable “termination for cause” be defined?  How will other types of favorable termination (voluntary, involuntary and for good reason) be identified and defined?  How are the termination definitions linked to annual compensation, benefits and any special termination pay-outs, e.g., termination in first year of employment, termination prior to expiration of initial term or subsequent term of employment, involuntary termination, for good reason, etc.
  5. Restrictions:  Are there personal or professional restrictions on the CEO while employed, and/or upon termination?  For example, can the CEO teach, write, do research or other similar activities, while employed?  Upon termination, can the CEO immediately work for another association in the same geographical area?  Can the CEO immediately approach employees of her/his former organization about career changes?

Thinking about these key parts of your CEO employment agreement, and reaching mutually agreeable resolution with your volunteer leaders will help to establish your credibility as a senior executive.  It will also make your life a lot more enjoyable, so consider these points before hiring and contract negotiations.  Good luck!

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