Executive Employment Agreements and Change in Control Arrangements

Description

CIC agreements are an essential component of executive agreements and compensation packages, encouraging CEOs and executives to pursue opportunities for mergers, acquisitions, and other corporate transactions even when those opportunities may result in the loss of the executive's position. Although CIC agreements are intended to protect companies' interests, shareholders, the IRS, and the SEC closely scrutinize excessive golden parachutes that far exceed salaries or don't reflect performance.

Counsel should be mindful of shareholder expectations, market practice, and the legal landscape when structuring these CIC agreements. Notably, Section 409A (which regulates deferred compensation) and Section 280G (which penalizes certain golden parachutes in M&A transactions) often must be carefully navigated to avoid adverse tax outcomes, all while reaching the business intent of the parties. Counsel should also be careful to analyze how the investing public might view certain of the compensation elements and how those could trigger adverse disclosures under SEC reporting rules. Buyers conducting due diligence in an M&A must carefully examine the target company's executive compensation plans to be aware of CIC triggering events and may ask them to be waived or modified.

Listen as our authoritative panel of executive compensation attorneys provides guidance on structuring CIC arrangements in executive employment agreements. The panel will discuss strategies for negotiating and drafting golden parachute provisions that withstand regulator and shareholder scrutiny and minimize adverse tax consequences while furthering company and shareholder interests.