So you are a "Young and Aspiring" association executive who has been offered your first CEO position. You have been an association professional for a number of years, but have never had an employment contract; you have always been an "employee-at-will," like the vast majority of other association employees (meaning the employment relationship can be terminated at any time by either party for any non-discriminatory or otherwise non-protected reason). Perhaps your prospective employer has offered you a contract, or maybe they have not. Regardless, in most cases, it is critical that you demand one.
While the practical reality is that even an employment contract is no guarantee of long-term employment, there are real benefits and protections that can be effectuated through a written employment agreement – both to you and the association. From compensation and benefits to roles, responsibilities and lines of authority, a contract can play a critical role in helping to ensure your successful tenure at the helm. Moreover, while as a brand-new executive, you may believe you have no leverage to push hard in the negotiation process, to the contrary, once the association’s leadership has made its selection decision, this is the opportune time for the executive to get the best contract terms.
While typically, the initial negotiations will result in a term sheet of key provisions, a well-drafted contract will include many others as well. And how certain provisions are structured in the agreement also can have a significant impact. Consequently, if at all possible, take the responsibility for having your attorney create the first draft (and seek reimbursement from the association for your legal fees).
What are key provisions to include in your employment contract? A few highlights (this list is by no means exhaustive): 1) Authority and Responsibility. Be sure to clarify that the executive has sole and exclusive authority for the hiring, firing, supervision, and compensation of all other association staff, subject to budgetary parameters set by the board; 2) Compensation. Spell out not only initial salary, but also minimum annual increases and bonuses, objective (not subjective) performance benchmarks and rewards (if any), who the executive reports to, and who determines merit raises and bonuses (try to keep this group as small as possible); 3) Benefits. This is an area where it is common for the executive’s benefits to be more expansive than the rest of the staff’s. From deferred compensation and retirement plans to enhanced term life insurance to club dues, spouse travel, automobile allowances, and relocation assistance, be sure to clarify which staff-wide benefits the executive is entitled to, and where the executive’s extend beyond. Certain benefits are sometimes "grossed-up" to cover the added resulting tax consequences to the executive; 4) Term, Termination and Severance. Whether the agreement is structured as a fixed multi-year term, with an "evergreen" renewal feature, or with an option for one party or the other to renew or terminate, be sure to protect yourself by providing for severance compensation in the event of termination other than for cause (and define "cause" with specificity). Such a safety net is of critical importance. A typical provision would provide for minimum severance equal to at least six months of salary, with added severance keyed to years of service. Benefits such as health insurance and retirement plan contributions also are sometimes provided for a defined period.
Bottom line: Decide on your own personal bottom line and fight hard for those key provisions that matter most to you. Then get it in writing. A clear and comprehensive employment contract will benefit the executive as well as the association and its volunteer leadership.
While the practical reality is that even an employment contract is no guarantee of long-term employment, there are real benefits and protections that can be effectuated through a written employment agreement – both to you and the association. From compensation and benefits to roles, responsibilities and lines of authority, a contract can play a critical role in helping to ensure your successful tenure at the helm. Moreover, while as a brand-new executive, you may believe you have no leverage to push hard in the negotiation process, to the contrary, once the association’s leadership has made its selection decision, this is the opportune time for the executive to get the best contract terms.
While typically, the initial negotiations will result in a term sheet of key provisions, a well-drafted contract will include many others as well. And how certain provisions are structured in the agreement also can have a significant impact. Consequently, if at all possible, take the responsibility for having your attorney create the first draft (and seek reimbursement from the association for your legal fees).
What are key provisions to include in your employment contract? A few highlights (this list is by no means exhaustive): 1) Authority and Responsibility. Be sure to clarify that the executive has sole and exclusive authority for the hiring, firing, supervision, and compensation of all other association staff, subject to budgetary parameters set by the board; 2) Compensation. Spell out not only initial salary, but also minimum annual increases and bonuses, objective (not subjective) performance benchmarks and rewards (if any), who the executive reports to, and who determines merit raises and bonuses (try to keep this group as small as possible); 3) Benefits. This is an area where it is common for the executive’s benefits to be more expansive than the rest of the staff’s. From deferred compensation and retirement plans to enhanced term life insurance to club dues, spouse travel, automobile allowances, and relocation assistance, be sure to clarify which staff-wide benefits the executive is entitled to, and where the executive’s extend beyond. Certain benefits are sometimes "grossed-up" to cover the added resulting tax consequences to the executive; 4) Term, Termination and Severance. Whether the agreement is structured as a fixed multi-year term, with an "evergreen" renewal feature, or with an option for one party or the other to renew or terminate, be sure to protect yourself by providing for severance compensation in the event of termination other than for cause (and define "cause" with specificity). Such a safety net is of critical importance. A typical provision would provide for minimum severance equal to at least six months of salary, with added severance keyed to years of service. Benefits such as health insurance and retirement plan contributions also are sometimes provided for a defined period.
Bottom line: Decide on your own personal bottom line and fight hard for those key provisions that matter most to you. Then get it in writing. A clear and comprehensive employment contract will benefit the executive as well as the association and its volunteer leadership.