Current Compensation Issues (Part 4 of 7): Retention Packages to Discourage Poaching
Time 2 Minute Read

The purpose of this Post is to highlight whether Compensation Committees should be offering retention packages to their executive officers to discourage their being poached by another company.  This Post is Part 4 of a 7-Part series addressing compensation adjustments that Compensation Committees could consider in order to continue to incent and retain their executive officers in today’s economy.


Many executives are suffering from depressed realizable pay levels.  This makes sense because a performance-driven compensation model would weight most of an executive's "total compensation" towards performance-based annual awards and long-term performance-based awards, and generally speaking these performance goals are no longer achievable.  And since long-term awards typically cover three or more years, many executives are likely worried that depressed pay levels will continue to be an issue in 2021 and 2022.  Such executives are susceptible to being poached by other companies since their taking new employment could "refresh" their pay levels.

Retention Packages

Many companies are offering retention packages or specially formulated performance bonuses to their executive officers.  For those Compensation Committees considering the issue, related thoughts include:

  • Consider the time horizon for the retention bonus (current calendar year, two years or more).
  • Consider whether any payout should be in the form of a lump sum or installments.
  • With respect to the use of performance measures, consider using a more broader range of measures than would otherwise be typical, including the use of more qualitative and individual criteria.   And since it will likely be difficult to establish meaningful performance goals due to today's economic environment, consider structuring any performance goals to be relative to the company's peer group.

Related Posts

Blog posts that are part of this 7-part series include:

  • Partner

    Tony’s multi-disciplinary legal practice focuses on executive compensation, ESOPs and employee benefit arrangements (including their related tax, accounting, securities and corporate governance issues) in the United ...


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