Senior executives rarely work on a standard offer letter. Their pay usually combines salary, an annual bonus, equity, deferred compensation, and severance that grows if the company is sold, and each piece carries its own tax and contract rules. These agreements are negotiated when everyone is optimistic and enforced when someone is leaving, often during a financing, an acquisition, or a dispute over performance. We represent companies, boards, and compensation committees, and we represent executives on the other side of the table, drafting terms that are clear enough to apply years later without a fight.
When Executive Pay Terms Matter
The issues surface at predictable moments: hiring a senior leader with competing offers, a promotion into the C-suite, a financing that adds investor-designated directors, a sale of the company, and a separation. A buyer will ask for every agreement that pays out on a change in control. A departing executive will read the definitions of cause and good reason closely. A public company must disclose these arrangements in its proxy statement and apply its clawback policy. Getting the terms right at signing matters more than at any later point, because the drafting choices made then control the tax result and each side's position in any later dispute.
Section 409A, Section 280G, And Clawbacks
Section 409A governs when deferred pay may be elected and paid, and severance often counts. Payment generally must be tied to permitted events such as separation from service, a fixed date, or a qualifying change in control, and a public company must delay certain payments to specified employees for six months after separation. Section 280G denies the company a deduction, and Section 4999 imposes a 20 percent excise tax on the executive's excess parachute payments, once change-in-control payments reach three times the executive's base amount. Private companies can often avoid the problem with a vote of more than 75 percent of disinterested shareholders. Exchange-listed companies must also maintain a clawback policy under SEC Rule 10D-1.
Agreements We Draft And Negotiate
We prepare and negotiate executive employment agreements, offer letters for senior hires, severance and change-in-control agreements, retention and transaction bonus arrangements, and nonqualified deferred compensation plans. For companies, we build consistent forms the board can approve once and reuse, with definitions of cause, good reason, and change in control that match the equity plan. For executives, we review the package, explain what each provision is worth in realistic scenarios, and negotiate the points that matter, such as double-trigger acceleration, release timing, and the treatment of unvested equity. We also run Section 280G calculations, prepare shareholder approval materials, and draft clawback policies and the award language that makes them enforceable.
Severance And Clawback Disputes
Disputes usually arise when an executive leaves. The company claims termination for cause; the executive claims good reason and full severance. A buyer refuses to honor a change-in-control payment, or a board seeks to recover incentive pay after a restatement or misconduct. Some of these fights are contract claims under state law, often subject to an arbitration clause. Others fall under ERISA if the severance arrangement is a plan with ongoing administration, which changes the forum, the standard of review, and the available remedies. We represent companies and executives in negotiation, arbitration, and litigation, and we look first at the documents and the timeline, because a missed notice or cure period frequently decides the outcome.
Practical Steps And Common Mistakes
The most common error is inconsistency: an employment agreement, an equity plan, and a severance policy that define cause or change in control differently. Another is a release requirement that lets the executive control the tax year of payment, which Section 409A does not allow; payment should be fixed to the later year when the release period spans two years. Companies also forget that a Section 280G shareholder vote must happen before closing and that the executive must first waive the payments the vote does not approve. Executives sign without modeling the cutback or asking how equity is treated in a sale. A short review before signing costs little compared with fixing any of these later.
