Steven Hall & Partners | CEO Employment Agreement Practices

CEO Employment Agreement Practices

February 14 2018

Steven Hall & Partners recently reviewed CEO employment and post-termination agreements among the 200 largest companies in the United States based on annual revenues (“Top 200”).

While some have predicted that employment agreements for CEOs will fade away due to ever increasing corporate governance standards, the majority of the leaders of the largest companies have some form of agreement providing for benefits upon qualifying terminations.  Among the CEOs in the Top 200:

  • 65 have employment agreements (33%)
  • 125 have severance agreements (63%)
  • 129 have change-in-control agreements (65%)
  • 45 companies do not have any form of agreement (23%)

Post-termination benefit agreements for CEOs are the most common in this study sample.  Generally, these plans are in place for a group of top executives at the company and the CEO is one of several participants.  Severance agreements refer to plans that provide post-employment benefits in the event that the executive is involuntarily terminated by the company without cause or the executive terminates employment for good reason.  Change-in-control agreements provide post-employment benefits if the CEO is terminated either just prior to or subsequent to a change in control.  We find that change-in-control agreements tend to provide greater benefits to the executive than severance agreements.