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Why College and University Presidents Need an Attorney-Negotiated Contract – Part 2

Picking up on the list of reasons discussed in last week’s blog:

3. So as to Preserve the Good Relationship Between the President and the Board Which Prevails at the Outset of the President’s First Term of Office.

At the beginning of every college and university presidency, there is customarily an “Era of Good Feelings” which prevails during the first few months, maybe a year or even more, of the new president’s term. The same is true of CEOs in other fields, including new heads of for-profit companies and even (at least usually) in the initial term of a new President of the United States.

After a careful and exhaustive process, the Board has anointed a new leader of its beloved institution, and everyone recognizes that during the settling-in period it is only fair to give the new president not only the benefit of the doubt, but warm support for his or her initial acts, plans and programs. Of course, preserving those good feelings and formulating a working relationship between the Board and the president will be key to the president’s ultimate success.

The lawyer who is involved in the negotiation of the president’s first contract can help set the right tone, first by building a relationship with counsel for the Board of the college or university. And, just as importantly, a knowledgeable executive employment attorney representing the president can deflect the heat in those rare instances where someone on the Board takes offense at one of the president’s “asks” in the finalization of the president’s new contract. Rather than sully or jeopardize his or her relationship with the Board at the outset, the president can always blame some mis-step on his or her legal advisor (in fact, this seldom even becomes an issue when an attorney experienced in this area has intentionally built a cordial and productive relationship with university counsel). After all, both sides and their lawyers are working toward the single aim of creating a fair and workable deal for the incoming leader. And, of course, a knowledgeable executive compensation attorney does not, particularly in the first contract, ask for terms and conditions which are or even may appear dramatically “out of market” without having carefully prepared and articulated the rationale for wanting something which would be unusual under ordinary circumstances.

4. So as to Obtain an Excellent First Contract for the President Which Will Serve as the Basis for an Even Better Contract to Be Negotiated for a Renewal Term if the President Is Successful or for the Negotiation of the President’s Exit Package if Things Do Not Work Out.

First-time college and university presidents may assume that there is no need to engage in any negotiations regarding their proposed initial presidential contract, either because they feel obliged to accept the first offer which the Board Chair or head of the search committee makes to them, or with the misplaced notion that the first contract has no bearing on future negotiations. This assumption is simply incorrect, and misunderstands the importance of the first agreement between a school and its new president.

While it is true that if the Board of a college or university decides to offer “x” dollars in base salary to the candidate it has selected, no one is likely to get the Board to double that amount, there are many other aspects of the president’s first contract, both monetary enhancements and necessary protections, which in fact will be accepted if properly negotiated, and which can add substantial value to the agreement.

In addition, a well-negotiated first contract provides a firm foundation for the future. It will serve as a good starting — not an ending — point for negotiations regarding the president’s renewal contract at the beginning of the next term of employment if the president is successful and she is to remain at the institution. At that time, the president’s employment counsel can build on the first contract to achieve major enhancements, including, for only two examples, in areas like deferred compensation and the president’s freedom, now that he or she is valued by, and “a known commodity” to, the academic community, to accept prestigious and potential lucrative for-profit Board positions outside the college or university. Since many of the necessary protections in a good presidential employment agreement will already be in place, the parties can focus on how to make the business terms even more rewarding to the president in a renewal contract as an incentive for her or him to commit to a further term of employment in this challenging position. And, in those unfortunate situations where the president is terminated (which terminations often have little to do with the president’s own efforts, abilities or even success), if the president has an excellent first contract, it will meaningfully ease and encourage the negotiation and achievement of the best possible separation and severance package for that president as well.

(In the forthcoming continuation of this blog, we will continue to explore this topic including responding to the most frequently asked questions and concerns raised by presidents and senior administrators in higher education when confronted with a career-advancing contract in connection with a change in employment.)

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.