Severance packages are key tools when replacing executives.

Successful businesses grow due to the efforts of every employee, but the management and executive teams will have an outsized impact on the company’s operations. It is critical that you have the right people in the right roles if you want to optimize your company’s potential.

Maybe you are a chief executive at a company who needs to bring in fresh talent, or perhaps you are a board member at a corporation who suspects certain executives of cooperative misconduct. You firmly believe that the best option will be to remove certain high-ranking individuals from the company and replace them with better candidates.

Such major employment moves often prompt pushback from the targeted worker, so your company may want to take steps to avoid conflict and possibly litigation. (In certain situations, litigation with wrongdoing outgoing executives is unavoidable and necessary.)

A severance package can be a powerful source of motivation

Most managers and executives expect some severance when they leave a company, and many professionals aggressively negotiate favorable severance packages when onboarding at a new entity.

Often, performance metrics, job longevity and misconduct can factor into what severance someone receives.

Your company can pave the way for a smoother transition when replacing someone with executive or managerial authority by making use of their severance package. Reviewing someone’s contract to determine what they are entitled to, given the circumstances, and then offering something extra can be a way to get them to quickly sign paperwork agreeing to the transition.

It also gives you wiggle room to push back if they try to counter the offer by demanding more or pushing to remain in their position. The more leverage you have, the easier it will be to secure the ideal conditions for the upcoming transition.

Employment litigation is costly

Having an individual drag your company into court over allegations that you violated their employment contract or terminated them unfairly can cost tens of thousands of dollars in court fees and attorney expenses.

There is also the incalculable damage to the company’s reputation that can result from such lawsuits to consider. Perspective future talent for your company could learn about the case and fancy a poor opinion of your business because of how one worker behaves when exiting your organization.

Proactively seeking to avoid conflicts when removing an employee from a crucial role at your company will minimize losses and also help defend your reputation as an ethical business and an excellent employer.

That said, what prompted the decision to remove the executive may require litigation to redress the wrong caused, protect the company, and to set the example that your company will not tolerate such conduct from future executives or employees.

This is a factually specific analysis with an eye towards the future. Knowing the law and the contractual options and obligations is key in determining whether a severance package is in the best interests of the company.

The material contained herein is provided for informational purposes only and is not legal advice, nor is it a substitute for obtaining legal advice from an attorney, nor do you have an attorney-client relationship with Schwartz Law Firm unless and until the same is expressly agreed to. Each situation is unique, and you should not act or rely on any information contained herein without seeking the advice of an experienced attorney. All information contained in links are the property of the linked site