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
Why So Many Victims Of Sexual Harassment Stay Silent, Still
Kathleen Peratis, The Atlantic, January 4, 2013
Two decades after Anita Hill's testimony against Supreme Court nominee Clarence Thomas, women are still punished for confronting their harassers.
I'm a lawyer, a long-time practitioner of employment discrimination law, and a partner at Outten and Golden LLP in New York City. I guess I am what some people disparage by calling a "slick lawyer," a way to put down those who are passionate about justice. The work is hard and in Anita Hill's day even more so than today, claimants were so far ahead of the times that they were often unsuccessful in their legal claims. The law was so inhospitable in the 1990s and for many years thereafter that had Anita brought a legal claim—which she never did—it is likely that she would have lost in a court of law.
At about the same time as Anita Hill's claims exploded onto the public scene, my firm was involved in a very similar case, unsuccessful at the trial stage and then successful on appeal, which is why I am able to speak publicly about it. The details of this case give you a flavor of what the law was like in 1991. The claimant was a woman named Lisa Petrosino who worked for Bell Atlantic, which is now Verizon, repairing telephone lines. She worked out of a garage in Staten Island with an all-male crew who tormented her every day. The banter among the men in the workplace was crude and misogynistic, which would have been bad enough for Lisa, but they also singled her out. They drew crude pictures of headless women, women with their legs spread in the air, pictures of men having sex with animals, and of her having sex with supervisors, and left them in terminal boxes she was assigned to work on so she would find them. She felt threatened by the depictions of dismembered women. She said, "It's not that I don't have a sense of humor, but this stuff is not funny." They ridiculed her appearance, they told her to "calm her big tits," they said she complained because she was "on the rag." Bell Atlantic not only did nothing to stop it, their supervisors joined in. Bell Atlantic's lawyers, one of whom was a woman, argued that none of this was illegal, it was just boys being boys. The federal district court judge agreed with them and dismissed the case.
The Supreme Court had decided years before that sexual harassment and hostile environment were illegal, but the prejudices of the trial judges remained. In Lisa's case, the trial judge saw no illegality. The appellate court finally reversed and sent the case back to the trial court for trial, and at that point, the case was settled. So the wrong was righted, in a way, but only in a way. Like Anita, Lisa suffered greatly along that road to justice. Some women are transformed by the vindication of a legal victory but some find the process totally debilitating and demoralizing. Women who go public still get punished. It's a sad reality, but some of my happiest clients are the ones who settled for less than their claim was worth and even the ones who decided not to complain at all. Women were punished in 1991, they were punished in 2000, and the sad reality is they are punished still today. I was recently retained by a woman who works at a major education institution in New York City. She was having a business dinner with her boss and he put her hand on his crotch, on his erect penis, freaking her out. She will probably sue and it will be harder on her than she can imagine. These cases do happen less now than they used to but when it happens to you, that is cold comfort.
But let me tell you a little bit about what is actually illegal, then and now. The definition of an illegal hostile environment has not changed—it is an environment where there is an atmosphere of hostility and misogyny that is either severe or pervasive. These words are subject to interpretation, of course, but in most courts, "severe" means that the bad actor, as we call him in my business, has engaged in at least some unwanted or unwelcome touching. I will explain the "unwanted" part in a minute. As for the "touching," it doesn't have to be rape, but to have a really good case for hostile environment discrimination it has to be serious. In the absence of unwanted touching, the claimant has to show that the bad actions were pervasive, and that means a pattern of incidents. How many? No one can quantify what is enough and as in any legal case, it will depend on many things, such as how the claimant and the other witnesses come across to this particular judge or jury.
I mention that the conduct has to be "unwelcome." This is very important because it provides defendants with the opportunity to blame the victim by saying she was a willing participant. It is the "You asked for it" defense. "Why did you send your boss birthday cards or light-hearted emails, if you were bothered by his conduct?" "Why did you get drunk at the holiday party?" "Why did you let your boss come to your room when you were traveling?" "Why did you tell all those off-color jokes?" "Why did you wear a skirt so short, if you're not a slut?" "Why didn't you quit?"
Because this road is so tough, I often hear clients say, "Why me? Why did this have to happen to me? Why has my life been turned upside down by this creep who had no right to do this to me?" And it is unfair. But the law has been transformed by the many women who have bravely stepped up and paved the way for the rest of us. That is what Anita did.
This post is adapted from I Still Believe Anita Hill: Three Generations Discuss the Legacies of Speaking Truth to Power.
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
The Dodd-Frank Act's Whistleblower Provisions: The Act's Best Hope For Exposing Financial Wrongdoing
In this BNA Insights article, Outten & Golden attorneys Tammy Marzigliano and Cara E. Greene take a close look at these provisions and the effects of preceding laws, such as the Sarbanes-Oxley Act, to examine what their future impact might be. Bloomberg BNA, Workplace Law Report, 10/22/2010.
On Sept. 15, 2008, Lehman Brothers collapsed, sending shock waves through the financial services industry and portending the industry's broader meltdown. Less than two weeks later, Washington Mutual was seized by the federal government and placed into receivership. Over the next year, more than 100 banks folded, Americans saw $13 trillion in wealth evaporate, and massive securities fraud, like that committed by Bernie Madoff, shook investor confidence to the core. The housing market collapsed, the number of people out of work hit 15.6 million, and the federal deficit ballooned. America was in the midst of the Great Recession.
In response, on July 21, 2010, the federal government enacted the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “act” or “Dodd-Frank Act”), which overhauls and strengthens federal oversight of the financial system. While it is impossible to know whether the financial meltdown could have been avoided had the act's provisions been adopted in 2007 instead of 2010, the question on everyone's mind is whether the Dodd-Frank Act will keep it from happening again. Only time will tell if it will have the desired and intended impact, but the act's whistleblower provisions attempt to ensure that in the future financial fraud and irregularities are exposed long before they corrupt the entire system.
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.
Kathleen Peratis, The Forward, July 24, 2008. A brief discussion of who transgender people are, and the differences between transgender and gay people.
You have to hand it to Rep. Barney Frank, the man knows how to empathize. In the first-ever congressional hearing on workplace discrimination against transgender people, held by the House in late June in an Education and Labor subcommittee, Frank said he understands what it means to be trapped in the wrong body — because that is what happens when his legislation gets bogged down over in the Senate.
The lesbian, gay, bisexual and transgender — or LGBT, for short — press called the congressional hearing on gender identity discrimination “historic” and “groundbreaking.” The mainstream media pretty much ignored it, but the issue is worth keeping an eye on.
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.
Ethics Corner: Third Circuit Vindicates Plaintiff's Attorney
Justin M. Swartz and Cara E. Greene. July, 2007. Ethics Corner is a regular contribution by the ABA, Labor & Employment Law Section’s Ethics and Professional Responsibility Committee.
The Third Circuit recently overturned a district court order disqualifying a plaintiff’s attorney who had conducted an ex parte interview of the defendant’s administrative assistant. EEOC v. HORA, Inc., No. 05-5393, 2007 U.S. App. LEXIS 15705 (3d Cir. June 29, 2007) (unpublished decision). Characterizing the disqualification as “draconian,” the Circuit held that the district court abused its discretion because the lawyer did not violate any ethics rules, and, even if she had, there was no prejudice to the defendant.
The plaintiff’s lawyer, Jana Barnett, represented Manessta Beverly in a sex harassment and retaliation case against a Days Inn franchise and its management company. During discovery, Barnett conducted an ex parte interview of Debbie Richardson, an administrative assistant at the Days Inn. The district court disqualified Barnett for conducting the interview, finding that she violated Pennsylvania Rules of Professional Conduct (“PRPC”) Rules 4.2, 4.4, and 5.7.
The Third Circuit reversed, holding that Barnett did not violate Rule 4.2 because the administrative assistant was not a member of the organization with whom ex parte contact was forbidden. The Third Circuit recently overturned a district court order disqualifying a plaintiff’s attorney who had conducted an ex parte interview of the defendant’s administrative assistant.