Executives who secure promotions or move to new companies tend to aggressively negotiate their compensation arrangements. Their employers frequently agree to make financial concessions based on the prior performance of the professional in question.
Often, a large severance package is a crucial component of an executive’s compensation arrangements. A so-called golden parachute allows them to exit the company with a large one-time severance bonus that could cost the organization six or even seven figures.
Golden parachutes can serve as a deterrent to organizations that want to remove an executive from their role due to ethical issues or job performance concerns. All too often, those managing a business may worry about the golden parachute promised to an executive when deciding to terminate that professional. Successful business litigation can help large organizations protect their resources when terminating an executive for cause.
Contract litigation can end company obligations
The agreement to provide a golden parachute to an executive is typically part of a severance agreement integrated into a comprehensive employment contract. Even when organizations include clauses in their contracts allowing them to limit or eliminate severance pay in certain scenarios, there can be uncertainty about the actual ability to do so.
Companies sometimes pay severance packages unnecessarily simply because they wish to avoid conflict that might lead to litigation. Between the expenses involved and the possibility of bad publicity, companies may decide that denying an exiting executive their golden parachute is not a worthwhile undertaking.
Despite the potential misapprehensions of others in leadership roles at the organization, litigation related to an executive’s severance package can be an intelligent choice. The records of the lawsuit can give existing shareholders confidence that the company consistently acts to protect their financial interests.
Additionally, the expenses incurred during the litigation process may pale in comparison to the amount the company might otherwise have to pay the exiting executive. Successful litigation related to an executive employment contract typically requires extensive documentation. Proof of substandard job performance, misconduct or issues at the company could help justify the decision to deny or diminish a golden parachute.
Pursuing business litigation over a severance package can be beneficial for an organization eager to eliminate an executive who has not met expectations. Organizations that prevail in such lawsuits can avoid providing large severance packages to an executive who has not fulfilled their promises to the company.
