Sunday, January 19, 2014

Association CEO contracts can create issues

As I posted Friday, an association CEO colleague emailed the other week informing me that her contract had not been renewed.

It got me to thinking about CEO contracts with their associations. 

Most recent discussions about CEO contracts focused on whether to have a contract and the length of the contract or the salary and other terms.

My colleague’s situation made me realize there is a much more important factor about CEO contracts: the length of the term ... more specifically, why have a contract length at all? 

After all, the only term that matters is the length of the termination notice and your severance. 

Evergreen Approach

In my mind, the CEO contract should be evergreen with no length to it. It should renew annually automatically unless one of the parties notifies the other of its intentions not to renew. 

Thus, if the contract started April 1 it would renew automatically the following April unless one of you provided the other a cancellation notice before September 1.

Why do this?

It gives you six months to find a new position and it gives the association six months to search for a new CEO. 

If you feel six months is not enough time for a job search, you may want to negotiate a three to six months severance package in your contract with the severance starting from the date your contract expires (April 1 in the earlier example).

Salary Discussion

Other than the initial starting salary, do not include salary terms in your contract. Salary discussions should be part of the budgeting process NOT part of your contract renewal process. This helps ensure that your annual evaluation stays focused on performance and metrics not on how much the CEO should be paid.

Keep this in mind when you are negotiating your association employment contract.

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