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The Value Added to Contracts for Senior Executives and College and University Presidents Far Outweigh Any Legal Fees

At the height of the Profumo scandal in England in the early 1960’s, the young Mandy Rice-Davies (unfairly portrayed by the tabloid press as a “good time girl,” in fact Rice-Davies was a brilliant woman who later became a notable business entrepreneur) was told that Lord Astor had denied being intimate with her. She promptly responded, “Well, he would say that, wouldn’t he?”

Similar skepticism may greet our confirmed belief as executive employment attorneys that the legal fees involved in having experienced counsel review, guide and negotiate new and renewal employment contracts for senior executives and college and university presidents invariably pay for themselves many times over. “Well, they would say that, wouldn’t they?” since it is true that we earn our living by these fees.

Self-interest, however, does not make something less true. Our experience over many years is that the value which a good executive compensation attorney adds to the contracting process is meaningfully greater than the cost of the legal fees in at least two ways:

The first way is straightforward: we are customarily able to add measurable monetary value to the terms of an executive contract originally offered.

For example, we recently helped negotiate a contract for a university president. The initial contract tendered by the university was not bad, but we were able to boost our client’s compensation for each year of the term, and we also added, among other items, increased disability insurance and earned sabbatical, extra vacation weeks, professional development expenses and higher severance compensation in the event of termination without Cause. A conservative calculation of the combined monetary value of these additional items was more than 20 times the legal fees which our client paid.

(College and university presidents often ask if we can negotiate reimbursement of part or all of their legal fees from the institution; sometimes we are able to do so, but we believe it important that the executive is primarily responsible for such legal fees in order that our independent judgment is not impaired by having to worry about our fee in the event — admittedly very rare — that we must tell a client that a proposed contract, even after negotiation, is not worth accepting. Of course, this is an infrequent occurrence, and it is always the client’s — not our — decision as to whether to accept the position being offered after we reach the best terms we are able to negotiate.)

In another actual example, this time in the business sector, we added more than a million dollars in tangible value to the executive’s contract as initially proposed; the legal fees were less than $35,000. Obviously, each situation is different and no lawyer can guarantee any particular result. The larger point, however, is that overconcern about legal fees makes as little sense as worrying about paying increased taxes on account of making more money.

The other way that executive employment attorneys add legitimate value to the contracts they oversee is equally important, although it cannot as easily be quantified in precise monetary terms: we customarily add crucial executive protections which are often omitted from the employer’s first version of the proposed agreement. Is the definition of “Cause” for termination too broad or does it lack the appropriate “cure” provisions? Does the contract contain the full range of corporate indemnities which both college presidents and business executives need and to which they are entitled? What about the additional protection of directors’ and officers’ insurance? What happens in the event of a dispute between the executive and the employer? (e.g., Has anyone drilled down on the need for non-binding mediation before either party can commence litigation? What are the pros and cons of arbitration as opposed to a lawsuit in court as a means of resolving such a dispute?)

And these are only some of the important protections which we focus on for our clients.

What are these worth? Potentially hundreds of thousands of dollars if anything goes wrong in the course of the employment relationship which the proposed contract covers, as any executive or university president who accepts a contract lacking in these protections may find out to their genuine, possibly even disastrous, monetary cost.

Accordingly, these two different types of “value added” dwarf the cost of legal fees, both as a matter of experience and common sense.

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.