Companies seeking to curtail share incentive schemes and bonus packages of departing executives will be walking a legal tightrope, Norton Rose employment specialists have warned in the third of a series of legalweek.com videos on crisis management.
Speaking in the latest instalment of Legal Week Crisis Management Q&A in association with Norton Rose, partner Monique Fry says companies may risk legal claims from former executives if they seek to claw back payments in response to public pressure to curb executive pay.
Fry argues that in many cases companies will find it difficult to withhold payments and benefits from staff if they have met performance targets, despite pressure from the Financial Services Authority for less extravagant severance deals.
She says: “Companies are certainly going to have to be very careful about how they treat leavers because the pressure is going to be not to accelerate awards but they’re going to need to balance that with potential claims that could be brought by the executives.”
In a separate Q&A session on bonuses, partner Paul Griffin outlines recent case law surrounding bonus payments. He urges companies to take care when exercising their discretion to curb bonuses and seeking to withhold bonus payments when employees are dismissed.
He blamed many bonus disputes on poor drafting and warned that the termination of contracts was a flashpoint because the relationship between employer and employee had come to an end.
But he also urged employers to manage the expectations of staff during bonus periods to avoid disappointment when the bonuses are awarded.
To view Fry's video and Griffin's video, visit Legal Week's video page.