Incoming CEOs are actively negotiating job contracts to secure their interests, as a growing perform-or-perish culture raises the stakes for India Inc’s top leadership.
CEOs—who earlier relied on good faith negotiations with potential employers—are taking a cautious stance amid a sudden surge in corner room exits and increased regulatory scrutiny. More CEOs are reaching out directly, seeking counsel during the negotiation process, say consultants and law firms.
“There’s been a change in the approach – it is more proactive than reactive to what the companies have to offer,” says Cyril Shroff, managing partner at law firm Cyril Amarchand Mangaldas. He said there has been a stark increase in individuals getting represented by top law and HR firms from the get-go.
“The ask now is for water-tight contracts, setting out in detail not just the roles, responsibilities and performance metrics—the non-performance of which could lead to potential exit—but also severance pay, treatment of equity holding, post-employment restrictions, and consequences of breach (not just by the CEO but also the company),” said Shroff.
This trend is intensifying in the technology and finance space, he noted.
Anshul Prakash, partner, employment labour & benefits at law firm Khaitan & Co said individuals are increasingly reaching out, not just for guidance on the terms of their contract but also for deeper strategic advice on exits.
He said there is a noticeable rise in including retention bonuses, accelerated vesting of stock options, and extended severance payouts in new job contracts. “One notable trend is the emphasis on clarity around board expectations, and also a push for a clearer definition of ‘cause’ for termination, to ensure that vague or subjective terms like ‘underperformance’ or ‘unsatisfactory performance’ are not used as grounds for dismissal,” noted Prakash.
In recent negotiations, Khaitan & Co saw a marked increase in executives pushing for a minimum lock-in period—typically from 24 to 36 months—during which termination without cause would entitle them to full compensation for the remainder of the term. This has become particularly common in high-risk sectors or where strategic transitions/restructurings are frequent.
In one case involving the heavy machinery manufacturing sector, a C-suite executive successfully negotiated a 36-month lock-in, ensuring he would get full salary and an added bonus of six months’ salary, even if his employment was prematurely terminated due to a board reshuffle.
In another instance, a financial services CXO pushed for accelerated vesting of stock awards upon termination for reasons other than related to performance. Last year-end, a CXO, while joining a PE-portfolio company, negotiated a contract to link compensation with performance on a 3-5 year horizon rather than quarterly reviews.
“Incoming CEOs are aware of the performance expectations and are negotiating more than before. This is leading to upward pressure on total compensation," said Dinkar Pawan, director - human capital consulting at Deloitte Touche Tohmatsu India LLP. "Performance targets are also being negotiated— incoming CEOs want targets that are achievable and aligned with the economic realities of the business environment. More and more (new) CEOs are protecting themselves more strongly in the event of involuntary exits.”
Apeksha Mattoo, partner at law firm Trilegal says while this has been the trend in the IT sector, of late it has become business/industry agnostic. “We have advised clients across sectors such as manufacturing, FMCG, consultancy services, insurance sector, healthcare, etc,” Mattoo said.
Cos receptive to a point
Amid these changes, boards and nomination and remuneration committees (NRCs) are willing to accommodate demands within reasonable governance boundaries, say experts. The balance comes down to how critical the executive's role is in meeting the company’s goals, they noted.
“Companies are becoming more receptive at a broader level as they are looking to set the tone at the top. Companies (especially those which are promoter-less) are using remuneration, equity stake and autonomy as leverage to find the right executive leadership,” said Cyril Shroff.
CEOs—who earlier relied on good faith negotiations with potential employers—are taking a cautious stance amid a sudden surge in corner room exits and increased regulatory scrutiny. More CEOs are reaching out directly, seeking counsel during the negotiation process, say consultants and law firms.
“There’s been a change in the approach – it is more proactive than reactive to what the companies have to offer,” says Cyril Shroff, managing partner at law firm Cyril Amarchand Mangaldas. He said there has been a stark increase in individuals getting represented by top law and HR firms from the get-go.
“The ask now is for water-tight contracts, setting out in detail not just the roles, responsibilities and performance metrics—the non-performance of which could lead to potential exit—but also severance pay, treatment of equity holding, post-employment restrictions, and consequences of breach (not just by the CEO but also the company),” said Shroff.
This trend is intensifying in the technology and finance space, he noted.
Anshul Prakash, partner, employment labour & benefits at law firm Khaitan & Co said individuals are increasingly reaching out, not just for guidance on the terms of their contract but also for deeper strategic advice on exits.
He said there is a noticeable rise in including retention bonuses, accelerated vesting of stock options, and extended severance payouts in new job contracts. “One notable trend is the emphasis on clarity around board expectations, and also a push for a clearer definition of ‘cause’ for termination, to ensure that vague or subjective terms like ‘underperformance’ or ‘unsatisfactory performance’ are not used as grounds for dismissal,” noted Prakash.
In recent negotiations, Khaitan & Co saw a marked increase in executives pushing for a minimum lock-in period—typically from 24 to 36 months—during which termination without cause would entitle them to full compensation for the remainder of the term. This has become particularly common in high-risk sectors or where strategic transitions/restructurings are frequent.
In one case involving the heavy machinery manufacturing sector, a C-suite executive successfully negotiated a 36-month lock-in, ensuring he would get full salary and an added bonus of six months’ salary, even if his employment was prematurely terminated due to a board reshuffle.
In another instance, a financial services CXO pushed for accelerated vesting of stock awards upon termination for reasons other than related to performance. Last year-end, a CXO, while joining a PE-portfolio company, negotiated a contract to link compensation with performance on a 3-5 year horizon rather than quarterly reviews.
“Incoming CEOs are aware of the performance expectations and are negotiating more than before. This is leading to upward pressure on total compensation," said Dinkar Pawan, director - human capital consulting at Deloitte Touche Tohmatsu India LLP. "Performance targets are also being negotiated— incoming CEOs want targets that are achievable and aligned with the economic realities of the business environment. More and more (new) CEOs are protecting themselves more strongly in the event of involuntary exits.”
Apeksha Mattoo, partner at law firm Trilegal says while this has been the trend in the IT sector, of late it has become business/industry agnostic. “We have advised clients across sectors such as manufacturing, FMCG, consultancy services, insurance sector, healthcare, etc,” Mattoo said.
Cos receptive to a point
Amid these changes, boards and nomination and remuneration committees (NRCs) are willing to accommodate demands within reasonable governance boundaries, say experts. The balance comes down to how critical the executive's role is in meeting the company’s goals, they noted.
“Companies are becoming more receptive at a broader level as they are looking to set the tone at the top. Companies (especially those which are promoter-less) are using remuneration, equity stake and autonomy as leverage to find the right executive leadership,” said Cyril Shroff.
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