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Perspective

In a heated recruiting environment, prospective employees often demand contracts to cover their downside in the event the new opportunity doesn’t work out. The REIT sector is fueling this trend by providing for large cash payments and acceleration of restricted stock in the event of a merger or if the new hire is terminated without cause. This topic inevitably emerges in the negotiation of employment terms, and even private-side employers are forced nowadays to reckon with the issue. However, despite growing candidate demands, most employers will draw the line and refuse to agree to employment contracts except for the most senior-level executive hires. For most other senior recruits, some lesser form of severance agreement is typically pre-negotiated for the eventuality of a termination without cause, providing for six to 12 months of salary payments (without a bonus component) and acceleration of a long-term incentive package. Let’s see what happens when the market softens. I expect that severance packages will follow suit and become less prevalent and not as generous.

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