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Jan 19 2016
As the saying goes, “What goes up must come down,” and oftentimes, that is true, too, of one’s executive position. While it’s not inevitable for every career to end in a termination, should that occasion befall you, it’s best to be prepared.
In my book, SAFETY NETwork: A Tale of Ten Truths of Executive Networking, I interviewed 110+ C-level executives who had been laid off, downsized or just plain terminated. For each of those individuals, crafting a plan toward the next step in their career took a backseat to the front and center issue of negotiating that all-important severance package.
For some, they had gone through this exercise before and knew what to expect. A few hired attorneys who had a cadre of experience in executive compensation cases on the employee side and were able to cull clauses and conditions from previous clients’ files to utilize toward the current client’s case. But, for the vast majority for whom termination was a first time event, the shock and disappointment from being let go inhibited their ability to negotiate an amazing severance package.
Certainly, the financial aspect of your severance agreement cannot be ignored, but like any other deal you may have crafted, negotiated or influenced during your career, it’s important to combine all parts of the puzzle into the entire equation. Here are key themes to look for when crafting yours.
Finances: Beyond looking at how many months (or in some cases, weeks) of pay you will receive, ensure that you are looking at all forms of monetary compensation payout such as unused sick days, unused vacation days, any upcoming holidays that you might have been paid throughout the weeks/months for which you’ll receive your severance. If you are usually slow to submit your expenses, now is not the time to dawdle! Get your expense forms submitted within ten days at the most to ensure full reimbursement for your most recent business trip expenses. Further, ask to receive your severance, outstanding stock and LTIP in a lump sum versus a monthly allotment—it’s your money, after all. Take control of it as soon as possible to do with it what you need to.
Reimbursements: Along the lines of the expense report payouts, calculate the reimbursements you normally claim in a year. These could be professional organizations or civic associations, club memberships, continuing professional education credits or certifications, professional journal subscriptions or other tuition reimbursements. Think about the perks that your family has received as well as part of your overall compensation package: children’s private schooling, specialized classes for special needs children, etc. These numbers may only be a few hundred dollars for some but added together collectively yield a sizeable chunk of change.
Medical: Most employees in the US are required by law to receive an offering for COBRA insurance. It’s prohibitively expensive, and with the advent of the Affordable Care Act, is outdated and inappropriate for the majority of cases. However, instead of simply rolling over and accepting either COBRA or Obamacare ASK to have the company cover your premiums for COBRA or extend coverage for the length of your non-compete (assuming you have one) or the number of months of the severance offer.
Services: It goes without saying that outplacement services are automatically included in the vast majority of today’s severance packages. Do your homework first on which firms are the best for YOU. Sure, your company likely has an already-established agreement with a firm with contracted rates, but if they do not fit your needs or your personality, what good will the services be to you? Instead, plan ahead with names (and prices) of outplacement firms and the services you need to resume your career to the fullest. If your company says no, ask for a cash outlay in lieu of the services so you can engage with the firm of your choice—or not. That way, you’ve bumped up your overall cash earnings by four or five digits and still might be able to work with the executive coach of your choice.
Insurance benefits: You got the medical coverage you need until you ‘think’ you’ll land back on your feet, but what about the other insurance benefits your employer offered to you such as Accidental Death & Dismemberment, Life, Officer & Director and other types. In many instances, the status of your employment does not legally bind them to remove you from their policy; ask to remain on their policy or at the very least, ask that the company cover your new rates with a new policy (which will likely be much higher since you don’t have the backing of larger volume to offset your new ‘solo’ status) for the length of your non-compete or the length of your severance package in months.
One note on O&D—your company may say you are no longer valid for that option since you are no longer an Officer or Director at the firm. However, should legal action be brought against the company for events that occurred under your tenure, you WILL be held liable in case of guilt. The company needs to ensure your legal backing at all times during and after employment for events occurring under your watch.
Expats: For those living on assignment outside their home countries, the negotiation of a severance package actually begins with the creation of the initial expat offer. For, whatever is or is not in that initial offer letter may be the letter of the law to determine the exit instructions for extricating yourself from your country. I highly encourage those who are about to engage in an expat assignment to join online expat forums for the best terms and conditions of assignments—including an exit strategy. If it’s not in writing before you go, it might not be extended if things don’t work out.
Tangibles: Corporate laptops and pads, company phones, personalized stationary, home office set ups, and other accouterments utilized during the course of your work life have become ingrained in your daily routine. If you are allowed to keep these items, be sure to ask IT to wipe out any proprietary data so you are not accused later on of any malfeasance or unintended access to company secrets. It’s not worth keeping that 2006 Dell desktop system that’s been in your home office for ten years if it’s going to cost you a lawsuit at a later date.
Intangibles: These are things you can’t touch or put a price tag on but are oh-so-valuable, such as letters of recommendations from those in executive management and access to all your contacts on social media. Social media probably deserves its own category, but just know that in many cases, companies are getting smarter and stricter about company contacts listed on social media garnered as a result of your employment are considered corporate property. Get it in writing before you walk out the door that who and what is on your social media sites is YOURS. For those not in a severance situation, add a blurb somewhere that, “The opinions expressed here are my own and do not represent those of my company or anyone else.” Virtual ownership is becoming more and more contested in courts today.
Of course, there will be minor additions to the list above. By using these key themes as your guide, you’re nearly guaranteed to have a stronger and more comprehensive checklist than had you gone in alone. Once this process engages, executives may feel like they are unable to speak with anyone out of legal obligation, fear or humility. Being prepared for the likely happenstance of an executive redundancy will make the process more productive—and profitable—for you.
Finally, as with negotiating your severance offer and reviewing any employment contract, I highly suggest engaging a competent employment attorney; an incompetent one can cost you tens or hundreds of thousands of dollars…or more.