4 exit agreements to make everyone happy

June 9, 2014       The NonProfit Times      

The day will come when a founding or long-time executive will ride off into the sunset, the work done, the feet ready to be put up for a rest.

When that happens, many organizations want to provide an exit agreement to reward that person, ensure a fair and appropriate ending to a long-term employment relationship and to give something to someone who has contributed so much. This is the opposite of a separation agreement and release, which is reached when an unhappy parting is taking place.

In “Exit Agreements for Nonprofit CEOs: A Guide for Boards and Executives” that appears in the Fall/Winter 2013 issue of “The Nonprofit Quarterly,” Tom Adams, Melanie Herman and Tim Wolfred give details about the four basic types of exit agreements. They are:

  • Catch-up. A monetary package acknowledging the executive’s salary has been significantly below market for a long period or the organization’s retirement contribution has been low or nonexistent.
  • Incentive to stay longer. This is an incentive to encourage the departing executive to remain as executive for a defined time for purposes important to the organization’s welfare.
  • Post-retirement services. Essentially, a contract for services to be provided after the leader moves out of the executive role.
  • Honorific. This is a memorial, in writing, recognizing or honoring a departing founder.
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