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Benefits for Presidential Spouses

We recently were successful in obtaining a tangible and well-deserved reward for the spouse of a university president, a concept also applicable to potential CEO spousal benefits in commercial sectors such as finance and media as well as the academic sphere.

Any experienced executive compensation attorney is aware that top employment positions, whether in academia or the for-profit world, make fierce demands on the family, particularly the spouse, of the chief executive. Constant travel and the management of numberless social events with a business purpose, let alone maintenance of a family life while the executive attends to the needs of the institution, often fall squarely on the presidential spouse. In plain fact, it commonly takes both partners in a couple to do the work of one senior executive in a key leadership position.

(Note that I am careful of gendered pronouns; in the academic sector, and increasingly in the commercial world, there are many women presidents with men filling the spousal role, so “he” and “she” labels are interchangeable for the purpose of the analysis.)

Historically, the president’s spouse — of either gender — has been unfairly undervalued and overlooked. They have often given up their own careers and wound up serving the president’s institution without compensation and with slight, if any, recognition. And it is frequently overlooked that each year out of the work force is both a year without monetary compensation and a year without the ability to make any contribution to the presidential spouse’s own retirement account.

As the essential unfairness of this situation has, however slowly, started to come to consciousness, so has the need to find a viable contractual remedy.

Fortunately, seeking equity for the presidential spouse dovetails perfectly with another significant consideration for any executive employment attorney who regularly represents university or college presidents or any other CEO, namely, a concern — whether legitimate or merely a matter of “optics” — that the president is overpaid or at least is at the tipping point where the Board of Directors or Trustees feels that it cannot afford to be publicly seen paying more compensation directly to the president. (The compensation of university and college presidents is regularly, if somewhat belatedly, reported and publicly available, as is, of course, the compensation paid to CEOs of publicly traded companies.)

The quandary of how to get more compensation to the president can be addressed, at least in part, by doing something monetarily meaningful for the president’s spouse, and it actually can be done in tax-favorable ways.

As an example, in the case of one university whose Board of Trustees wanted to keep its current president incentivized with more overall compensation, but was terrified of the “optics” — to regulators as well as potential students already burdened with high tuition — of directly paying more to the president, we worked out a plan whereby the university, recognizing the significant contributions of the president’s spouse, agreed to make yearly payments directly to the spouse in the form of an explicit bonus. The bulk of such a bonus, after the payment of taxes, can fund a carefully crafted insurance policy on the life of (and owned by) the presidential spouse. Given sufficient years to allow for growth, such a policy provides (1) a substantial death benefit if the spouse dies abruptly in the first years of the policy; and (2) more importantly, an increasing cash value resulting in a significant (and tax free) retirement benefit if the president’s spouse achieves a normal life expectancy. All of this was accomplished without increasing the reportable compensation of the chief executive herself.

To work out the details, we partnered with an outstanding and sophisticated insurance provider (rharrison@theharrisongroup.com). This is only one of the ways in which an executive employment attorney can add extra value to a top executive’s overall compensation package.

 

About the Author

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George Birnbaum

Since 1980, sophisticated business people have relied on George to apply the meticulous preparation, attention to detail, and devotion to his clients he learned from fabled trial lawyer Louis Nizer. A graduate of Harvard College and Harvard Law School, George has over 35 years of distinguished deal-making, litigation, mediation and arbitration experience which he has used to negotiate high-stakes agreements for senior executives and select business clients throughout the United States.