Executive Perquisites Negotiation

What Are Executive Perquisites?

Executive Perquisites are those benefits provided to executives above and beyond benefits provided to all other employees. Generally, executive perquisites include office space, parking, cell phones, annual physical, company car, club memberships, first class air travel, corporate aircraft, employment contracts, legal and financial services, severance agreements, change in control agreements, special deferred compensation, SERP and supplement disability and life insurance.

Employment Contracts

Employment Contracts provide security, through the use of the term contract and provisions covering performance, termination and compensation. An effective agreement represents the mutuality of interests between the parties and the method for achieving those interests. In a seller’s market, executives expect to receive this safety net in the event the employment relationship sours. Without an agreement, the executive becomes an at-will employee. Offer letters are generally not binding contractual agreements.

Supplemental Executive Retirement Plans (SERPS)

SERPS are unfunded non-qualified plans that provide additional retirement compensation and benefits to the top tier of executives and directors. Many plans provide for benefits that range from 60% to 80% of the executive’s final average salary. The plans are structured like defined benefit plans, and they provide a lifetime differential payment between the targeted overall retirement benefit and the benefits the executive receives from tax qualified plans and social security.

Change in Control & Severance Agreements

Change-in-Control Agreements, also known as “Golden Parachutes,” provide the executive with protection against the risk of losing their employment if the company is acquired. These agreements incentivize the executive and create further dedication to the company during turbulent times, thus protecting management interests.

Once the triggering event(s) occur, the executive receives an enhanced gross up severance (“parachute”) payment and benefits, potentially subject to a 20% federal excise taxes (IRS § 280G) for any payment that exceeds three times the “disqualified individuals'” (IRS § 4999) base salary. There are single (change in control or voluntary termination) and double triggers (a change in control and subsequent termination)

Executive Life Insurance Plans

Companies offer executives additional life insurance coverage as a perquisite, beyond the company group plan. The most common reason companies provide additional life insurance coverage is to remain competitive in attracting top talent. The executive benefits by receiving retirement income (ownership of the cash value life insurance policy), wealth building, and estate tax minimization.

Relocation Packages

Companies offer relocation programs that provide benefits to alleviate the financial and emotional stress of moving from one location to another. The executive generally expects to negotiate enormous benefits through these plans, in order to minimize financial and tax risks of the transition. Companies desire to remain competitive and retain top talent.

Make Whole or Leave Behind Payments

“Make Whole” payments, also known as sign on bonuses or “Golden Hellos,” are non-performance related payments used to compensate the new executive for loss of performance related compensation left behind with the former employer. The size of these generous make whole payments can be staggering and are dependent on the executive’s level, industry and company.

 

Speak With an Executive Compensation Attorney Today

Call Mark P. Carey P.C. today to speak with one of our employment attorneys about your executive compensation package. We help executives in New York, Manhattan and Connecticut review their executive compensation packages and discuss what measures they can take to improve their compensation and incentives.