1. Read everything that governs the exit
- The employment agreement or offer letter, especially "cause," "good reason," notice periods, and severance formulas.
- Any executive severance plan or change-in-control agreement.
- Equity plans and each grant: vesting, acceleration, and exercise windows.
- Bonus and deferred compensation plans.
- Restrictive covenants, which vary widely by state and are unenforceable in some.
- Indemnification agreements and D&O coverage for the executive's time in office.
2. Check the record before you decide
- Protected activity: Has the executive raised concerns about discrimination, harassment, safety, fraud, or securities violations, taken protected leave, or requested an accommodation? Timing near protected activity is the most common basis for a retaliation claim.
- Consistent treatment: How were comparable executives handled? Differences need a documented business reason.
- Documentation: Does the record support the stated reason? A sudden cause termination after years of strong reviews invites a pretext argument.
3. Confirm authority and approvals
Know whether the board, a committee, or the CEO must approve the termination and the separation terms. Compensation committee approval is often required for officer severance and equity changes. Process lapses can undermine an otherwise sound decision.
4. Build a separation agreement that holds
- A release in exchange for consideration beyond what the executive is already owed.
- For executives 40 and older releasing age claims: written advice to consult an attorney, at least 21 days to consider (45 in a group program with required disclosures), and 7 days to revoke.
- Carve-outs required by law, including the right to file an EEOC charge and to communicate with the SEC.
- Payment timing that fits Section 409A. Public companies may need to delay some payments to "specified employees" by six months. Have a tax advisor review.
- Cooperation, transition, non-disparagement, and return-of-property terms.
5. Public companies: clawback and disclosure
Listed companies must maintain a clawback policy under SEC Rule 10D-1 that recovers erroneously awarded incentive compensation after an accounting restatement. Separation terms should not conflict with it. The departure of certain officers, such as the principal executive, financial, and operating officers, generally requires a Form 8-K under Item 5.02 within four business days, and material separation agreements may need to be filed.
6. Plan the conversation, the message, and the handover
- Script the meeting: who is present, what is said, what is handed over, and what happens next.
- Agree the internal and external announcement and who is told first: board, leadership team, key clients, investors.
- Plan the transition of responsibilities, relationships, and signing authority.
- Coordinate system access, devices, and company property on the day.
For the executive's side of the same process, see how executives negotiate severance.
"An executive exit is judged three ways: by the people who stay, by the market, and later, possibly, by a jury. Plan for all three."
Noël Tarquinii, SHRM-SCP