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Retention and exit bonuses usually “discretionary” & “subject to cash”?
Hi Folks,
Just been informed by the CEO that the board has taken the decision to try and sell the company I work for ASAP and they want to retain me up to the point of exit.
I have been offered a retention bonus to stay, or an Exit Bonus if the company is sold. I want to know how much I can depend on these eventually coming through to into my bank account, considering the following terms:
- The bonus is discretionary; any queries/disputes as to bonus earned/payable the CEO's decision is final.
- Retention bonus is subject to overall company cash but is earned and paid as soon as cash permits if relevant (it's unlikely the cash situation will permit the payments, particularly in the opinion of the CEO)
- Bonus is lost and not payable if notice has been given to terminate employment.
- The exit bonus is payed from the proceeds of the sale (and I suppose that could be in arrears if that's how the buyer pays).
Is there any change in wording I should insist on?
As a separate question has anyone had any success negotiating a higher percentage of exit value as a bonus (as the head of a department when informed of the sale, not when being recruited), and if so how did you go about it?
Thanks very much for your help :)
- orbz 4y agoThat’s a lot of loopholes. From what I’ve seen in the past, the company should set up the amount they expect to pay everyone in exit bonuses aside now. Usually this is incentivized as whoever sticks around gets a chunk of that, so if people leave, the remainder get extra. Most importantly that means that leadership can’t reneg, that money has to be given away. This also means that money is effectively included as a debt the company owes during the sale so the new owners can’t reneg either. It’s in their best interest to ensure that the people who know how to keep things running stick around for awhile, so they won’t be opposed most likely. Otherwise how things are laid out is super sketchy to me. I would have to know what investment the company has already taken to know exactly how sketchy it would be. For example: preferred shares having exit multiples in case of sale could effectively wipe out any trace of payout you would see even for a large sale.
- RoyHargrove 4y agoOrbz - that was incredibly insightful, thanks - I have googled preferred stock and have now understood what you mean - I will ask the relevant questions regarding investment already raised.
- criticas 4y agoYou're being offered smoke and promises. I would not let the current offer affect my behavior in any way. They are asking you to assume the risk for the company's benefit. It does NOT even boil down to how much you trust the current CEO or how much they need you to make the sale. What happens if the CEO resigns when a sale goes through? Worst case, they sell the company and lay you off. Oops, no retention bonus, thanks for working through the sale. This is not legal advice, but if it were me I'd want more guarantees. If you want a retention or exit bonus, ask for an immediate pay increase, or deferred pay, or that it be unconditional. Would you be ok if they reneged? If you believe in the company and want to continue working there, treat the bonus as fairy gold and keep working. If you expect to leave anyway, ditto.
- RoyHargrove 4y agoThanks Criticas, you have gotten my cogs and gears moving. The CEO will definitely exit with the company - but surely the exit bonus will come through for all employees at the same time (or just after) the proceeds of the sale are split amongst all other investors/shareholders? Also how is the question of being retained by the new company related to the exit bonus? Surely that would be down to the current administration, as the new company would have nothing to do with it.