CEOs: Employment - Get It In Writing

By Virgil R. Carter

Resources for CEOs and aspiring CEOs may be few and far between.  In this article, and for the next several weeks, we will focus on some key insights for those in the chief executive’s role and those wanting to become a CEO.  We start with perhaps one of the most critical documents:  the CEO employment agreement.  Here are five critically important elements, among others, for a supportive and successful term as a chief executive: 

1. Duties:  Are the roles, duties and authority of the CEO clearly stated?  Is it clear the CEO is singularly responsible for staff, budgets, contracts, and other operational essentials?  Can these duties be changed, and if so, by whom and how?  Are changes (change of duties, change of role or authority, reorganization, merger, acquisition, cessation of operations, etc) considered as termination for good reason?
2. Compensation, benefits & annual review:  What is the base compensation?  What are the types of variable compensation, e.g., bonus, commission, etc.?  Are other types of compensation appropriate, e.g., one-time (moving, relocation, etc.) and/or recurring (car, travel, business club, etc)?  Will compensation be established and maintained as “market rate” and how will market rate be determined annually?  Who participates in the decisions about CEO compensation?  Does the association’s standard benefits package apply to the CEO?  How is CEO annual performance planning and evaluation conducted?  Who leads the annual CEO review process?  Who participates in the process?
3. Term & renewal:  Is there a reasonable initial term of employment?  When and how will the initial term be extended or renewed?  Who participates in the decision?  What if there is no formal action to renew the initial term—does it renew automatically, or is it considered involuntary termination?
4. Termination:  How will unfavorable “termination for cause” be defined?  How will other types of favorable terminations (voluntary, involuntary and for good reason) be identified and defined?  How are the termination definitions linked to compensation, benefits and any special termination pay-outs, e.g., termination in first year of employment, termination after first year, involuntary termination, for good reason, etc.?
5. Restrictions:  Are there personal or professional restrictions on the CEO while employed, and/or upon termination?  For example, can the CEO teach, write, do research or other similar activities, while employed?  Upon termination, can the CEO immediately work for another association in the same geographical area?  Can the CEO immediately approach employees of her/his former organization about career changes?

Thinking carefully about these key parts of your CEO employment agreement, and reaching mutually agreeable resolution with your volunteer leaders will help to establish your credibility as a senior executive.  It will also make your life a lot more enjoyable.  Good luck!