The Advisors' Blog

This FW Cook article says that an executive’s retirement may become rocky & unpleasant without proper planning. Crafting thoughtful provisions around equity treatment upon retirement can help pave the road for smoother transitions upon separation. Here’s an excerpt from the memo about the advantages that retirement equity award provisions can provide to companies and shareholders:

– Motivating long-term business decision-making through the retirement date
– Ensuring advance notice of retirements for smoother succession planning
– Avoiding requests for individual incentive program modifications by employees approaching retirement age
– Enabling consistency in treatment across all LTI recipients
– Allowing for restrictive covenants that include important shareholder protections
– Enhancing the competitiveness of the equity program in tight labor markets
– Guarding against the need for award modifications that may create say-on-pay pressure

FW Cook also suggests that it’s a win-win for both the company & senior executives if companies set up a formal policy for the treatment of executives’ long-term incentive awards upon retirement, since it allows boards to avoid one-off treatments towards some executives and not others. It also guards against compensation committees using their discretion to modify awards, which won’t be looked upon favorably by shareholders – and may also negatively impact internal pay equity issues.

– Emily Sacks-Wilner