Monday, June 16, 2008

Severance Package: Pre-Nup For Executive Hires

Many an executive has found out the hard way that the right time to negotiate a severance package is not when you’re fired, but when you're hired.

After spending six months in 1999 negotiating his exit deal from Citigroup following a falling out with Sandy Weill, his former mentor and boss, Jamie Dimon said he wouldn’t have taken the top job at Chicago’s Bank One in 2000 if it didn’t include a severance package.

Dimon, currently Chairman & CEO of JPMorgan Chase, put it this way at a 2005 conference on executive pay: “I don’t want to negotiate with anybody. I want to know exactly what it is I’m getting,” he said, referring to the separation agreement ... the corporate equivalent of the pre-nup.

Planning ahead pays

Whenever an executive asks for advice in negotiating an employment offer, I remind them that the leverage they have when a company wants them to come on board is far greater than when they want to throw them overboard. One exec I've known for years had his last three positions wiped out due to acquisitions. He's not concerned though ... his severance packages will carry him beyond retirement.

Given that the odds of getting fired in today’s world are greater than 50%, it's worth remembering that severance can be more valuable than compensation. Witness the headlines touting the departures of CEO's of failing companies. They're leaving with seven, eight and in some cases, nine figure checks.

Every severance package spells out what happens if you're fired, forced out or the company experiences a “change in control.” Before entering a new position, hammering out exit issues such as finances, benefits continuation, career services and the official exit statement is vital.

Top executive turnover is at record levels ... the "pre-nup" between you and your future employer could be among the smartest career moves you'll ever make.

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