How to negotiate your own Change of Control acceleration terms

A bit over two weeks ago, on Friday September 15, 2023, CEOWorld magazine published an article I wrote on “-Fighting the Double Trigger as free labor vs slavery: How to negotiate your own Change of Control acceleration terms..”

The new article is designed for CEOs and C-level executives, who work hard to bring a successful liquidity event, such as in a merger/acquisition, but also face significant risks with a change in control including getting laid off, reduction in compensation and benefits, changes in reporting structure, restrictions in seeking new employment due to non-compete or non-disclosure agreements. Those risks are often offset by the prospect of equity acceleration or a sale closing bonus. But even here there are still more risks. that can diminish or even prevent your receiving the benefits and your fair share of the success event which may be largely the result of your efforts.

This article discusses those additional hurdles placed before you to achieve benefit from a change of control often called the “Double Trigger.” A single trigger would accelerate your equity or pay you your full bonus on closing the change of control/ success event. The double trigger creates a second condition to your change of control /success benefits, that second condition being some level of additional required services over an extended period of time to the acquirer successor. The down-side of the Double Trigger to the C-level executive includes the following:

• Loss of your leverage to negotiate your own retention bonus and full employment, equity and executive compensation terms with the successor.
• Loss of your ability before and after the sale event to freely pursue and negotiate other career opportunities,
• Loss of your ability to immediately move on — to time your new start date and take up your new position right after the closing
• Loss of your chance to share in the liquidity event at the same time the investors receive their benefits from your efforts
• Potential loss of your entire acceleration or bonus you under the second trigger despite having already earned those benefits with the closing of the change of control

At the end, this article suggests a series of strategies for you to resist the Double Trigger, culminating with an invocation of Lincolnian and early Republican arguments from 19th century US history: Free labor vs Enslaved labor. Hence, this article’s title.

The article quotes this portion from the famous Lincoln -Douglas debates –

It is the eternal struggle between these two principles — right and wrong — throughout the world. They are the two principles that have stood face to face from the beginning of time; and will ever continue to struggle. The one is the common right of humanity and the other the divine right of kings. It is the same principle in whatever shape it develops itself. It is the same spirit that says, “You work and toil and earn bread, and I’ll eat it.” No matter in what shape it comes, whether from the mouth of a king who seeks to bestride the people of his own nation and live by the fruit of their labor, or from one race of men as an apology for enslaving another race, it is the same tyrannical principle. “

Abraham Lincoln, at Alton, Illinois, October 15, 1858 https://teachingamericanhistory.org/document/the-lincoln-douglas-debates-7th-debate-part-ii/

https://www.c-span.org/video/?59826-1/lincoln-douglas-alton-debate — at 1:58:11 in this 2 hour 39 minute video.

With the Double Trigger in place, the C-level executive, on many occasions, works, toils and earns the liquidity / change of control event, and often it is only the investors who “…eat it.” — that is, reap the benefit. It is often the case too, that investors enhance that profit, receiving a premium from the acquirer because Double Trigger sale terms effectively delivers you and your full-time services to the successor delaying and perhaps ultimately depriving you of your share of the success event you already earned. True, it is not slavery, but it is still a form of what Lincoln would have called the “theft of labor”.

To see my full CEOWORLD magazine. article, go to LINK: https://ceoworld.biz/2023/09/16/fighting-the-double-trigger-as-free-labor-vs-slavery-how-to-negotiate-your-own-change-of-control-acceleration-terms/

Or on my website at https://www.executiveemploymentattorney.com/fighting-the-double-trigger-as-free-labor-vs-slavery-how-to-negotiate-your-own-change-of-control-acceleration-terms/

This was my 43rd article published in CEOWORLD since 2016. Previously, the editor advised that I can use “Featured in the CEOWORLD magazine” and the CEOWORLD “Logo” on my website and add CEOWORLD magazine in my LinkedIn profile’s “Experience Section” as an “Opinion Columnist.” and authority in the field.

On its own initiative, CEOWORLD magazine created on their website a library of Robert Adelson published articles. You can peruse this library and/or read as many of my 43 published articles as you wish. See https://ceoworld.biz/author/robert-adelson/

With more than 12.4+ million-page views, CEOWORLD magazine is the world’s leading business magazine written strictly for CEOs, CFOs, CIOs, senior management executives, business leaders, and high net worth individuals worldwide. https://www.linkedin.com/company/ceomagazine/

It is my hope that this article will be of benefit to CEOs, C-level and senior executives who are being hired for or are now working toward an acquisition or exit event, that would result in a change of control sought by investors. The article may offer special benefit if you are expecting acceleration, a bonus or other benefits as result of the success in securing the event and may want to review and potentially challenge Double Trigger terms that can shackle you and potentially cause loss of your share of the benefits you earned on closing of the success event. If you or any colleague of yours has a need in this area, please do reach out to me @ 617–875–8665 or [email protected].

On Friday November 4, 2022, CEOWorld magazine published an article I wrote on “How to Manage Multiple C-Level Executive Job Offers”

This new article is designed for CEOs, CFOs, COOs, and other C-level and senior executives, who currently have or expect to soon have multiple job offers, each job offer presenting an attractive opportunity, and where you as C-level executive, seek guidance of how to manage these offers for best effect financially, and for your families and your career.

This article discusses the art of managing multiple executive job offers to get the best results for yourself, including

• How to evaluate multiple job offers,
• How to manage the process and in doing so manage expectations of the parties,
• What executive contract terms to seek from each company,
• How to negotiate for the best terms from those available and still position yourself well for future opportunities,
• How to navigate this process while maintaining your current position.

Finally, the article discusses planning your exit to do so on good terms that enhance your reputation.

To see my full CEOWORLD magazine. article, go to LINK: https://ceoworld.biz/2022/11/04/how-to-manage-multiple-c-level-executive-job-offers/

Or on my website at https://www.executiveemploymentattorney.com/how-to-manage-multiple-c-level-executive-job-offers/

This was my 39th article published in CEOWORLD since 2016. Previously, the editor advised that I can use “Featured in the CEOWORLD magazine” and the CEOWORLD “Logo” on my website and add CEOWORLD magazine in my LinkedIn profile’s “Experience Section” as an “Opinion Columnist.” and authority in the field.

On its own initiative, CEOWORLD magazine created on their website a library of Robert Adelson published articles. You can peruse this library and/or read as many of my 39 published articles as you wish. See https://ceoworld.biz/author/robert-adelson/

With more than 12.4+ million-page views, CEOWORLD magazine is the world’s leading business magazine written strictly for CEOs, CFOs, CIOs, senior management executives, business leaders, and high net worth individuals worldwide. https://www.linkedin.com/company/ceomagazine/

It is my hope that this article will be of benefit to CEOs, C-level and senior executives to offer them insights and guidance to make the most of the opportunity when you are being courted and …more than one suitor company is vying for your services for you to accept their job offer for next executive position.

Feel free to tweet or share this article. If you or any colleague of yours has a need in this area, please do reach out to me @ 617–875–8665 or [email protected].

On Thursday September 1, 2022, 2022, CEOWorld magazine published an article I wrote on “Stock Rights That Protect the Value of Your Executive Equity Compensation.”

This new article is designed for CEOs, C-level and senior executives, who have recently received a job offer or expect to receive a job offer and will be negotiating terms of executive compensation which will include executive equity. 

In those negotiations, executive equity is often a very significant and often a major part of the executive compensation and a often a driver to accept a job offer.  This is so because executive equity offers the prospect of greater financial upside value than from your fairly fixed and limited cash compensation.  This special upside potential for executive equity arises from three different factors: (a)  Appreciation – with your service the stock price or value might rise significantly, (b) Liquidity Event – a potential acquisition or an IPO  might also significantly increase value, (c) Favorable Taxation – with appropriate structuring, appreciated equity on cash out may be taxed at a much lower rate than cash compensation for much greater take home pay. 

Thus, given the high importance of equity in the CEO’s or C-level executive’s compensation package the focus of my article then moves to discuss these five (5) critical areas of stock rights and terms you want to be sure to give proper attention in your negotiations to give you the best chance to achieve the potential value from the equity you are granted: 

• Meaningful Level of Equity – to be sure that sufficient equity is granted so that if success is achieved, it will be impactful for you,
• Tax Favorable Structure – negotiation over the form of your equity at the outset is quite important because in tax law – “form is substance” – different forms produce very different tax results and you want tax-favored equity if possible,
• Severance Protection – if midway through the buildup you are forced out, you want your severance buy-out to embrace your equity as well as less important cash components of your comp package,
• True Up Adjustment – especially if you are brought in to secure a financing raise, you don’t want to be a victim of your own success and seeking a level anti-dilution protection is a fair ask,
• Cash-out protections – if after a number of years, no liquidity event is on the horizon, it is helpful to have a put option with the company to assure at some point you can tap into the value you achieved.

To see my full CEOWORLD magazine. article, go to LINK: https://ceoworld.biz/2022/09/01/stock-rights-that-protect-the-value-of-your-executive-equity-compensation/

Or on my website at https://www.executiveemploymentattorney.com/stock-rights-that-protect-the-value-of-your-executive-equity-compensation/

This was my 38th article published in CEOWORLD since 2016.  Previously, the editor advised that I can use “Featured in the CEOWORLD magazine” and the CEOWORLD “Logo” on my website and add CEOWORLD magazine in my LinkedIn profile’s “Experience Section” as an “Opinion Columnist.” and authority in the field.  

On its own initiative, CEOWORLD magazine created on their website a library of Robert Adelson published articles.   You can peruse this library and/or read as many of my 38 published articles as you wish.  See https://ceoworld.biz/author/robert-adelson/
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With more than 12.4+ million-page views, CEOWORLD magazine is the world’s leading business magazine written strictly for CEOs, CFOs, CIOs, senior management executives, business leaders, and high net worth individuals worldwide. https://www.linkedin.com/company/ceomagazine/

This presentation was given eight weeks ago on May 17, 2022, for the Boston Entrepreneurs’ Network (ENET), where I was one of three invited speakers for the ENET’s webinar that evening on the topic “Recruiting Board Members and Senior Executives”.

As I explained to the ENET audience that night, since 2016, my law work has increasingly focused on executive representations, negotiations over job offers, employment terms, equity, executive compensation, separation and severance, for C-level and senior executive clients.

Today, more than 95% of my law work and 98% of all new law work consists of those representations. 

But on occasion, a company will hire me.

Why would a company do that?  Why would a company hire an attorney known to be one so focused on representing the interest of executives?

The reason:   The company is  having difficulty recruiting an A-level senior executive.  They cannot pay top dollar and are willing to try something different to recruit that ideal man or woman to fill the pressing need in their organization.

So … in that time of pressing need, the company hires me, as one who knows what executives seek to help the company “think out of the box” – to devise a strategy and prepare documents to get the best executive at the least cost and within the company budget.   For a startup or  early stage company, it is executive recruitment on a shoestring.

In my work representing companies, my slogan is “Appear Generous.  Demand Performance.”  The strategy I develop and then the documents I prepare are radically different then most executive employment and equity documents.  My documents do appear to be fair …even generous.  And in recruitment, I help the company with its “sell” – telling executives, “Even at less base pay you will come out ahead with our package.  And what’s more, this package reflects a culture where you will be valued and respected.”

But we still demand performance.  My documents are still employment “at-will” and I make sure that a company can readily terminate a non-performer.  But what is different, is that my documents provide that if the executive does perform, he or she won’t be cheated out of what they earned.   Sadly, that element of basic fairness, is often so rare in today’s corporate America.

In my presentation and slides, I discuss such issues as

• Employment position and terms
• Base pay and bonus structure
• Tax favored equity structure
• Fair equity terms and vesting
• Reasonable equity rights
• Reasonable termination protections
• Fair severance terms

Between the revolutionary terms I suggest,  and our explanation and “sell” to the executive recruit, I have had a high success rate.   Although we are often significantly outbid on the dollar figure, I often get my target man or woman for my company client.

For my slides for this presentation, LINK:  https://www.slideshare.net/RobertAdelson/building-keeping-your-executive-team-how-to-recruit-and-retain-senior-executives-for-your-startup-or-early-stage-company

To see and listen to the video of my 19-minute ENET presentation on executive recruitment from my website, LINK:  https://youtu.be/vCCJ5RO1blw

​or access both my presentation slides and video recording on my website, LINK:   https://www.executiveemploymentattorney.com/building-keeping-your-executive-team-how-to-recruit-and-retain-senior-executives-for-your-startup-or-early-stage-company/   

It is my hope that this article will be of benefit to CEOs and Company founders who are having difficulty in recruiting a high caliber C-level and senior executive for a role key to growth, and might want to think out of the box….  Feel free to share these slides or this portion of my July 2022 Business Law Newsletter.  If you or any colleague of yours has a need in this area, please do reach out to me.

Eight days ago, on Monday March 30, 2022, the executive career advancement website IvyExec published an article I wrote on “Merits of RSUs vs Stock Options and Other Forms of Executive Equity Compensation.”

This new article is designed not only for C-level and senior executives, but even for many directors and mid-level executives. 

My article discusses a less well known form of executive equity RSUs – restricted stock units, including these subjects: 

• What are RSUs?

• How are RSUs different from the more common forms of executive equity, stock options and restricted stock?

• How are RSUs taxed in ways different than stock options and restricted stock?

• In what situations are RSUs an attractive executive equity choice? 

• In what situations are other choices preferable for the executive?

To see my full IvyExec  article, go to LINK:
https://www.ivyexec.com/career-advice/2022/merits-of-rsus-vs-stock-options-and-other-forms-of-executive-equity-compensation/

Or my website at
https://www.executiveemploymentattorney.com/merits-of-rsus-vs-stock-options-and-other-forms-of-executive-equity-compensation/

IvyExec hosts articles and webinars from experts in the career, leadership, and business spaces who wish to share their knowledge with our audience.  In April 2021, I was invited to write for IvyExec since it seeks original content on the topics of career development, leadership, and business strategy as it applies to senior-level and C-Suite professionals.  IvyExec blog posts and webinars are shared with its community of more than 2 million members on its website, in its newsletter, and on its social media channels.  https://www.ivyexec.com/career-advice/write-for-us/

IvyExec claims a “Community of 2.5M+ Leaders”.

It is my hope that this article will be of benefit to  C-level, senior and even lower level executives who are now or may in the future be negotiating over equity as part of their executive compensation and are not confident the stock price will rise and might even decline, and would like an alternative form of equity that can retain some value in cases where “underwater” stock options become worthless.