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Silence Is Golden

Here is a quick quiz which all clients in need of an executive employment attorney should take:

Client A is a university president for whom we have carefully negotiated an “exit package” consisting of a severance and separation agreement, aspects of which will not go into effect until the president leaves office on June 30, at the conclusion of the academic year. Anticipating his departure, the agreement was signed on February 1. In April, a question arises about his transition to a new job with another university. The president resists the temptation to handle the issue himself. Rather than raise the subject in his weekly meeting with his current Board Chair, he calls his executive employment lawyers to get their advice as to how to handle the situation.

Client B is the CEO of an industrial company for whom we also have negotiated a separation and severance package to provide him with a smooth employment transition. He, too, has questions about his entitlements as well as his obligations to his current employer, including the practical effect of a clause in his separation agreement (negotiated by us) which provides him with a written letter of recommendation in lieu of the employer’s standard procedure of refusing to provide any written references [NB: it has become standard HR practice in both the for-profit and not-for-profit worlds for an employer to give out very limited information about a departing executive, usually nothing more than the name of the executive and the fact that he or she filled a specified role at the employer — usually by job title like “Chief Financial Officer” or “Senior Managing Director” — during the specified time period; other than these basic details, employers, including business entities and colleges and universities, customarily (unless negotiated otherwise) provide no information to a prospective new employer other than to confirm the executive’s salary if but only if the executive has provided that information to the new employer]. Here, in the case of Client B, a question has now arisen as to whether the prospective new employer can speak to Board members or other executives of the company from which the CEO is departing. Does this fall within the separation agreement, or is it a situation likely to cause trouble? Our CEO Client B decides he does not need to refer the matter to his executive employment counsel, and that he can “handle it himself.”

Quiz question: Which executive handled the situation more productively?

The answer, of course, is Client A, who, recognizing a potentially inflammatory situation, has remained silent and immediately sought legal advice before wading into a volatile area that we had already addressed by way of a negotiated resolution.

Why do clients sometimes try to “do it themselves,” even though they actually have engaged experienced executive employment attorneys?

Some of them want to save the cost of additional legal fees. This almost always has the opposite result, since it usually costs meaningfully more for us to fix a situation in which the client has re-involved himself than it does for us to handle it in the first place. Also, of course, top executives are customarily extraordinarily competent people who are used to solving problems as part of their work life; as a result, the emergence of a problem, even in their own affairs, often triggers the immediate reaction that they must solve the problem with no additional outside help.

Such a reaction can be counterproductive, however, so we urge our clients not to react in any way before calling us first. (There was a temptation to title this blog “Please Shut Up,” but that seemed unnecessarily punitive.)

Frequently Asked Questions

1.     Q.     “Are there other reasons for immediately referring problems to your executive employment attorney?”

A.     Absolutely. The sooner we identify a problem or a potentially dangerous development, it is easier for us to construct a solution. Clients are rarely able to do this on their own.

2.     Q.     “Are there other good reasons for refraining from discussing the problem directly with the employer?”

A.     Such a discussion may or may not be appropriate, but only an experienced executive employment attorney can give you guidance on this issue after knowing the facts. It is always both wiser and more cost-effective to call your attorney before responding to a problem yourself directly. Additionally, some of these problems have such an immediate, often negative emotional impact that the client is likely to do something not in their own interest. College and university presidents who learn that their employment is being terminated should resist the temptation to “fall on their sword.” Instead, they should not react in any way and immediately and pick up the phone to their executive compensation lawyer.

3.     Q.     “Is your advice to say nothing before having a confidential conversation with an executive employment attorney also designed to preserve the attorney-client privilege?”

A.     Go to the head of the class! We will address the important issue of this privilege in our next posting.

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.