Where the value and the risk sit
Equity awards carry the largest swings in value, and their terms on vesting, acceleration on a change in control, and treatment on termination matter as much as the size of the grant. Severance protection depends on definitions such as cause and good reason, which is frequently where disputes start. Deferred compensation arrangements are subject to federal tax rules that penalize poorly structured payment timing, and large change-in-control payments can trigger extra taxes for the executive and lost deductions for the company. At public companies, pay is disclosed in detail, shareholders cast advisory votes on it, and listed companies must have policies to recover certain incentive pay after an accounting restatement.
Documents to collect
Gather the offer letter or employment agreement, the equity plan and each award agreement, the bonus plan, any severance or change-in-control plan, and any restrictive covenant agreement. Compare them carefully, since a plan document may override a promise in an offer letter. If something was promised orally, ask for it in writing. If you are leaving, find the deadlines for exercising options and electing continued health coverage, because they can be short and are easy to miss. Statements from the equity plan administrator help confirm what has actually vested, which is not always what the offer letter suggested.
Questions for negotiation or departure
For an incoming executive, we look at the definitions that control severance, the treatment of equity in a sale, any clawback or repayment terms, and the scope of non-compete and non-solicit covenants under the law that will govern them. For a departing executive, we review what has vested, what may be forfeited, and whether the release in a separation agreement is worth what is being offered for it. Boards and compensation committees bring their own questions about process, disclosure, and the tax effect of arrangements on the company. Tax advice is often needed alongside the legal review, and we coordinate with your advisors.
