How to Structure a Fair Executive Severance Agreement

Host: TK Kerstetter
Guest: Ryan Harvey, Partner with Meridian Compensation Partners
Few things cause shareholder outrage as when a CEO is terminated for poor performance, then walks away with millions in severance payments. Rewarding someone who has destroyed shareholder value certainly seems like a backward concept, yet every year we see those examples. While the concept around severance pay sounds simple, it can be the source of much angst for a board or compensation committee who is unprepared.
In this episode, host TK Kerstetter invites Ryan Harvey, a partner with compensation consultant Meridian Compensation Partners, to discuss the importance of a well-structured severance agreement. Harvey outlines recommendations for compensation committees and details the key elements that any severance package should include.
“...[compensation] committees need to step back and think about what kind of restrictions they might want to place on the executive post termination,” said Harvey. “Pretty universally, severance payments have a waiver on legal claims, but beyond that I would generally recommend that companies take a look at adding a non-disparagement restriction, a non-solicitation of employees, and a non-solicitation of customers.”
Harvey also answers: What are the key mistakes boards make when structuring an executive severance arrangement?