Negotiating Executive Employment Agreements: Cutting A Path Through The Regulatory Thicket
Wendi S. Lazar and Katherine Blostein write about negotiating executive compensation agreements, and current issues. The landscape of executive compensation has changed significantly since the financial crisis of 2008. As a result of the ensuing downturn and increased public scrutiny, executives’ leverage in negotiating the terms and conditions of their employment and equity agreements has decreased. The overwhelming outcry about excessive pay from shareholders and the public following the downturn resulted in new legislation that limits executive pay for top executives at public companies and imposes compensation restrictions and disclosure requirements on large companies generally. However, in the intervening years, the Securities and Exchange Commission still has not enacted rules implementing a significant portion of the new legislation, and therefore much uncertainty remains. In addition, the past several years have seen a return to performance-based compensation, as well as a movement towards eradicating excessive guaranteed bonuses on Wall Street and among other bonus-based businesses. Wendi S. Lazar and Katherine Blostein write about negotiating executive compensation agreements, and current issues. Bloomberg BNA, Pensions and Benefits Daily. Reproduced with permission from Pension & Benefits Daily, 127 PBD, 07/02/2014. Copyright 2014 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com
Wendi S. Lazar and Katherine Blostein. Bloomberg BNA, Reproduced with permission from Pension & Benefits Daily, PBD, 11/02/2011. Copyright 2011 by The Bureau of National Affairs, Inc. (800-372-1033) http://www.bna.com
The financial crisis of 2008 and the ongoing down-turn in the economy has had a significant effect on executive compensation and on executives’ leverage in negotiating the terms and conditions of their employment and equity agreements. The overwhelming outcry about excessive pay from shareholders and the public has resulted in federal regulations that limit executive pay for top executives at public companies and impose compensation restrictions and disclosure requirements on large companies generally. In addition, there has been a return to performance-based compensation, as well as a movement toward eradicating guaranteed bonuses on Wall Street and among other bonus-based businesses.
However, because of a need for top talent in tough times, companies are adjusting to the newly imposed restrictions and, where possible, are finding creative ways to structure compensation packages for employees. Unfortunately, public opinion is not as easily assuaged. The current challenge for companies and their counsel negotiating executive agreements is to balance the need for attracting and compensating top talent against potential negative public opinion. How hard and where to push becomes a concern in order to ensure that these agreements pass muster with the companies’ shareholders.
With these considerations in mind, attorneys representing executives should be aware of the most recent trends, developments, and regulations that will affect negotiations in the current economy.
Executive Pay: Skydiving With a New Parachute; Recent regulations affecting Executive Compensation.
Wendi Lazar and Katherine Blostein survey the new laws and regulations associated with the current economic downturn and the resulting shifts in the form, nature, and timing of executive compensation. Recently enacted laws like the American Recovery and Reinvestment Act of 2009 and the Dodd-Frank Wall Street Reform and Consumer Protection Act, as well as Section 409A of the Internal Revenue Code, impose firm restrictions on the compensation of top executives; the restrictions vary based on the size of the employer and whether it is publicly traded. This article concludes that “the days of paying excessive executive compensation unchallenged by regulators and shareholders [are] over.” The authors emphasize the need for attorneys negotiating executive employment agreements to be aware of these and other developments and their impact on the type of compensation packages employers are offering their top executives. Attorneys also must ensure that all agreements about compensation are memorialized in an employment agreement or other contract, including provisions for the treatment of deferred compensation in the event of termination.
*Originally published as Wendi S. Lazar and Katherine Blostein, “Changing Economy Impacts Executive Pay,” BNA Pension & Benefits Daily, 172 PBD, Sept. 09, 2009.
Reproduced with permission from Executive Compensation Library on the Web, XCLW, 06/06/2011. Copyright
Multiple Issues In Corporate Raiding Of Employees: Outside Counsel
Wendi S. Lazar and Katherine Blostein, New York Law Journal (online), May 1, 2009
Now that bankruptcy proceedings have replaced mergers and acquisitions, poaching key employees rather than buying a division can be cost effective. Corporate raiding of employees, however, raises serious legal and financial concerns for everyone involved, but particularly for employees and their counsel.
Poaching a coveted employee or raiding a team is bound to leave behind an angry employer who wants revenge. The hardest job for employee-side counsel is to keep the client from becoming a defendant in a lawsuit against both the employee and the new employer.
Knowing how to prevent or minimize an employee's liability in this situation is critical. Counseling employees on terms and conditions to be negotiated with the new employer before departure will protect them from economic loss and protracted and costly litigation.
Arbitrability Of Sarbanes-Oxley Whistleblower Claims
This article explores the arguments presented by member firms and registered employees, and outlines what arbitration panels have decided. Laurence S. Moy. Pearl Zachlewski, Linda Neilan, and Katherine Blostein. The Neutral Corner, Newsletter of FINRA Neutrals, Volume 1, 2008.
Since the passage of the Sarbanes-Oxley Act of 2002 (SOX), arbitrators handling employment claims may be faced with a throny question concerning SOX whistleblower claims: Should a SOX claim be litigated in court or arbitrated? Ultimately, the question comes to whether SOX whistleblower claims constitute "employment discrimination" claims, and are thus exempt from arbitration under Rule 13201 of the Code of Arbitration Procedure for Industry Disputes (Code). This article explores the arguments presented by member firms and registered employees and outlines what arbitration panels have decided.
Counseling Multinational Employees: Their Rights And Remedies Under US Law
This article by Outten & Golden partner Wendi S. Lazar sketches a map through the convoluted terrain of representing multinational and expatriate employees. Simply determining whether there may be a cause of action can require careful parsing of the laws of multiple jurisdictions and the employer's corporate structure as well as the usual inquiries into the employee's and employer's conduct and relevant contracts. Using a case study of one employee's circumstances and potential legal claims, Lazar outlines the important issues an attorney must resolve in order to best counsel a client. (2006, with significant contributions from Wayne Outten and Anjana Samant.)
Employment attorney, Wayne N. Outten, with Douglas C. James, discusses the ethical obligations of law firms and departing partners and how they must handle this situation in a way that is consistent with the principle of client choice. This article originally appeared in Law Journal Newsletters' Law Firm Partnership & Benefits Report, September 2004. For more information, visit www.ljnonline.com.
The answer is, nobody.
When a partner leaves a law firm, the parties have to allocate various partnership rights, assets, and other interests. They may allocate most of these interests in any way that they choose. They may not, however, allocate clients, perhaps the most valuable of partnership “assets.” The client alone decides whether to remain a client of the firm, to leave with the departing partner, or to choose another attorney. Law firms and departing partners have an ethical obligation to handle these situations in a way that is consistent with the principle of client choice.
Mediation Advocacy: An Employees' Attorney Perspective
Employment attorney Wayne N. Outten, Georgetown University Law Center, CLE, Employment Law and Litigation Institute: Legal Trends and Practice Strategies, Thursday-Friday, April 15-16, 2004, Washington, DC.
This paper addresses negotiation approaches and dispute resolution procedures that are well-suited for dealing with the problems and disputes often encountered by employees and their counsel.
The opportunities are legion for problems and disputes to arise out of the employment relationship – during and after the period of employment, and involving non-legal as well as legal issues. Counsel for employees should, of course, be familiar with the legal issues that may arise and with the traditional legal procedures for addressing such legal issues. But familiarity with such legal matters is not enough. Counsel for employees should also be familiar with tactics, strategies, and methods for solving legal and non-legal problems and resolving disputes that do not necessarily depend on the assertion of legal rights and that do not necessarily employ formal legal procedures. This paper addresses negotiation approaches and dispute resolution procedures that are well-suited for dealing with the problems and disputes often encountered by employees and their counsel.
Can Law Firm Partners Sue The Firm For Employment Discrimination?
Employment attorneys Wayne Outten and Justin Swartz. This article originally appeared in Law Journal Newsletters' Law Firm Partnership & Benefits Report, February 2004. For more information, visit www.ljnonline.com.
This article will first discuss reasons that law firms, especially large firms, are susceptible to discrimination suits by their partners. Next, it will explain two threshold requirements for law firm partners to sue their firms for employment discrimination. Both of these requirements turn on whether certain partners are deemed employees. Third, the article will discuss the Supreme Court’s Clackamas decision and lower court decisions that preceded Clackamas but used similar analyses. Finally, it will note that,under some federal and state laws, law firms are vulnerable even if their partners are not deemed employees.Discussion of: reasons law firms may be susceptible to discrimination suits by their partners; two required thresholds for filing such a suit; Supreme Court's Clackamas decision; and finally a note on why some law firms are vulnerable even if their partners are not deemed employees.