Retention of executives is generally achieved by a combination of ongoing elements including:
Employment contract provisions
Notice period, and
Severance payments in the event of company initiated termination for other than cause,
Incentive plan provisions
Vesting provisions of LTI plans,
Deferral aspect of STI plans whether via deferred cash payments or allocations of matching shares which vest with additional service.
It is important to ensure that these aspects have been appropriately addressed particularly when a sector is experiencing intense competition for proven executive and technical talent, as is currently occurring in the resources sector.
However, in some circumstances e.g. merger and de-merger activity, a temporary specific program can be required to maintain stability among the ranks of top executives. These programs tend to be once-off for specific periods and generally involve cash payments but shares and share rights that vest on completion of the required service period, are sometimes used.
Consideration needs to be given to the quantum of the payments and what happens in the event of termination of employment before completion of the vesting period.
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