When you’re negotiating an executive employment agreement, the headline numbers matter — but the details matter just as much.
Here’s a breakdown of the key monetary and non-monetary provisions you need to understand, based on the best practices outlined by leading employment attorneys.
Frequently Negotiated Monetary Provisions
– Sign-on Bonuses and Clawback Provisions
- Sign-on bonuses are often used to attract top talent — but they usually come with clawback provisions.
- If you leave before a certain period, you may have to repay part or all of the bonus.
What to negotiate:
The length of the clawback period and whether it’s prorated.
– Make-Whole Provisions
- If you’re leaving a job where you’re forfeiting unvested equity or bonuses, a “make-whole” provision compensates you for that loss.
- These also come with clawback provisions.
What to negotiate:
The amount and timing of the payment — and whether it’s tied to performance.
– Base Salary
- The foundation of your compensation package.
- Public companies often benchmark against peer groups.
What to negotiate:
The percentage increase and whether it’s reviewed annually.
– Bonuses (Range and Manner of Computing)
- Bonuses are often tied to individual and company performance.
- The calculation method matters as much as the target amount.
What to negotiate:
The formula, the performance metrics, and whether they’re objective or subjective.
– Equity Issues
- Performance vesting: Tied to company performance metrics (e.g., TSR, revenue growth).
- Temporal vesting: Tied to time (e.g., 4-year vesting schedule).
What to negotiate:
The mix of performance vs. time-based awards and the rigor of performance goals.
– Reimbursement of Attorneys’ Fees
- Some agreements reimburse executives for attorneys’ fees incurred in negotiating the agreement.
- For public companies, this may be disclosable — and taxable to the executive.
What to negotiate:
Whether fees are reimbursed and the cap (if any).
– Severance and Change of Control Provisions
- Severance: What you get if you’re terminated without cause or resign for good reason.
- Change of control: Enhanced protections if the company is sold.
What to negotiate:
The multiple of salary/bonus, the trigger (single vs. double trigger), and the definition of good reason.
Frequently Negotiated Non-Monetary Provisions
– Definition of Termination for Cause
This defines what conduct justifies firing you without severance.
What to negotiate:
A narrow definition that requires a material breach, notice, and an opportunity to cure.
– Resignation for Good Reason
This defines when you can quit and still receive severance — often tied to a demotion, pay cut, or relocation.
What to negotiate:
Broad enough to protect you, but not so broad that it’s unenforceable.
– Restrictive Covenants
- Non-compete: Limits your ability to work for competitors.
- Non-solicit: Limits your ability to recruit clients or employees.
- Confidentiality: Protects company information.
What to negotiate:
Reasonable scope, duration, and geography — and whether they’re enforceable under New York law.
– Release Provisions
Many agreements require you to sign a release of claims in exchange for severance.
What to negotiate:
Whether the release includes claims you may not yet know about — and whether it’s mutual.
– Dispute Resolution Forum and Governing Law
- Arbitration vs. court litigation.
- Which state’s law applies.
What to negotiate:
A neutral forum and a state with favorable law.
– Indemnification and D&O Coverage
Protection if you’re sued for actions taken on behalf of the company.
What to negotiate:
Broad indemnification and coverage for legal fees.
– Confidentiality and IP Provisions
- Protects company trade secrets and intellectual property.
- May include return of company property upon departure.
What to negotiate:
Clear scope and reasonable restrictions.
– Cooperation Provisions
Requires you to cooperate with investigations or litigation after you leave.
What to negotiate:
Reasonable notice, compensation for time, and limits on the duration.
– Non-Disparagement
- Often one-way (executive can’t disparage the company).
- Sometimes mutual (both sides agree).
What to negotiate:
Mutual non-disparagement and clear definition of “disparagement.”
Bottom Line
| Category | Key Provisions to Negotiate |
|---|---|
| Monetary | Sign-on bonus, make-whole, base salary, bonus formula, equity mix, attorneys’ fees |
| Non-Monetary | Cause, good reason, restrictive covenants, release, dispute resolution, cooperation |
| Protections | Indemnification, D&O coverage, mutual non-disparagement |
Contact an Employment Lawyer for Help
If you’re negotiating an executive employment agreement, you need a lawyer who understands the market, the law, and the leverage points.
At The Farrow Firm, we represent executives in negotiating, drafting, and reviewing employment agreements, severance packages, and equity arrangements.
Contact us today to schedule a confidential consultation.
** Disclaimer: This blog post is intended for informational purposes only and does not constitute legal advice. For specific legal guidance, please contact us today.