Executive Compensation is a broad term used to describe various compensation agreements and packages. Such compensation is often tied to performance and/or retention conditions . These compensation packages can be offered at the start of an employee's employment or at anytime thereafter. Executive Compensation agreements are increasingly offered with a myriad of employee obligations such as restrictive covenants.
Employees should also be aware of the different forms that compensation in these agreements can take as well as the implications of each form of compensation. Equity award agreements can award employees either the full value of the underlying equity, or they may provide only for the appreciation value of the equity between two specified points in time. Restricted stock and restricted stock units fall into the former category, while stock appreciation rights and options fall into the latter.
Deferred compensation in these agreements usually vests according to specified vesting schedules and conditions or they may be subject to forfeiture provisions. Employees who are terminated or who resign should make sure to fully understand any obligations and vesting conditions in their agreements as well as any potential effect subsequent agreements (such as separation agreements) may have on their compensation agreements.
Issues regarding vesting, payments, and forfeiture often arise when an employee resigns or is terminated. An employee's right to receive their deferred compensation will often depend both on the language of the award agreement as well as various legal principles, which can be quite different depending on which state governs the agreement. Employee's should consult with experienced and knowledgeable executive compensation attorneys to make sure they receive all of the compensation they are legally entitled to.
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