Five "Musts" for Employment Agreements

By: Eileen Morgan Johnson, CAE

A solid employment contract for a CEO or other senior staff should include five key provisions. (Titled "Seal the Deal" in the print edition.)

No two employment agreements are exactly the same. But whether you're the hiring organization or the candidate for an executive position, you'll want the contract sealing the deal to include these five critical components.

1. A detailed position description should outline what the employer expects of the employee. For a CEO, this includes management duties, number and title of direct reports, fundraising, lobbying, board relations, volunteer relations, and travel. Vague references to the position "as described in the association's bylaws" or to "general duties of the position" are insufficient to communicate to the employee and the supervisor what is expected. The position description may refer to another document, such as a strategic plan, and it should be reviewed and edited each time a contract is renewed or replaced with a new contract.

2. Compensation includes base salary, any bonus opportunities, and all benefits. Sometimes contracts will specify the increase that the employee can expect to receive each year as a percentage of base salary. Identify taxable fringe benefits.

3. The agreement should describe the supervision structure, explaining to whom the employee reports, as well as how, and how often, the reporting is to occur. A CEO agreement should specify whether the CEO reports to the entire board, the executive committee, or the board chair/president.

4. The performance review process should be briefly explained. If the employee's performance will be measured against specified goals or achievements, the agreement should say so specifically.

5. A good employment agreement will cover termination, including how both parties may end the agreement with and without cause. It should also state whether the employee will receive the association's typical severance package (if there is one) or whether a special severance package has been negotiated.

Candidates for executive positions should not be shy about discussing the terms of their employment and requesting a written agreement. Taking the time to fully document both parties' expectations can save trouble down the road.

Eileen Morgan Johnson is a partner in the law firm of Whiteford, Taylor & Preston LLC in Falls Church, Virginia. Email: [email protected]

Eileen Morgan Johnson, CAE

Eileen Morgan Johnson, CAE, is cochair of the nonprofit and associations practice group at Whiteford, Taylor & Preston L.L.P. in Falls Church, Virginia.