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Few Execs Leave Money on the Table Upon Departure

July 16, 2018

Michael Francese is quoted in the Agenda regarding compensation guarantees for at-will executives. Francese says that almost all employees are technically employed “at will, in the sense that their employer can terminate their employment at any time for any nondiscriminatory reason.” He adds that the biggest advantage of an employment agreement is the severance protection, which usually details severance benefits and the events that trigger it. Francese adds, “An executive without an employment agreement risks not being adequately protected if the employer terminates his or her employment, although many employers mitigate this risk for their employees through severance programs or other protections in equity award agreements.” In addition, according to Francese, the employer also benefits from having an agreement with severance benefits in place, as it "often provides an incentive for an executive not to quit and, therefore, give up severance.” Francese adds that aside from compensation, employment agreements generally include “many important post-employment covenants from the executive, such as protection of the employer’s confidential information and trade secrets, assignment of intellectual property, and covenants not to compete or solicit company employees or customers." If such an agreement is not in place, Francese concludes that boards and their compensation committee members “should carefully consider whether the company is adequately protected in these areas.”

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