A withdrawal agreement with an outgoing associative executive is an instrument that can shed light on the post-CEO role of the outgoing leader within the non-profit organization. In other cases, a withdrawal agreement may be an instrument for making a catch-up financial contribution that partially recognises the benefits and services of an under-compensated manager. Or it can be a tool to say thank you. But whatever the purpose or motivation of the agreement, there are important considerations that need to be considered in order to ensure that the final agreement is fair, reasonable and legally defensible. Use clear language in the Withdrawal Agreement. The results should be easily understandable, both for both parties and for any third party without passion. The perfect time to start exit planning – especially for long-time or founder executives – is several years before the retirement date. (Even if there are only a few months or even weeks left during your tenure, exit planning can be beneficial.) Many nonprofits don`t plan effectively, typically because the manager didn`t explain their intentions early enough, or more often because the CEO and/or board didn`t understand the importance and complexity of this critical organizational change. Make sure the entire board is aware of the details of the withdrawal agreement, including financial terms and research/basis so that the payment is not considered by the IRS as excessive compensation. Document the steps taken by the Board to approve the Final Withdrawal Agreement. Indeed, it is necessary to create «happy endings». As described by Non-profit Quarterly, an «exit deal» can serve as a script for such fairy tales.
Unlike a separation agreement, which is a contract to limit a company`s legal exposure to employee misconduct, the exit agreement aims to provide long-standing executives with a fair and appropriate reward for service, usually in the following circumstances: • dismay of stakeholders. Messages about the «golden parachutes» paid to outgoing CEOs of companies are rarely received with resounding applause from anyone other than the executive`s immediate family. While a nonprofit board may decide, after careful consideration, that making a one-time lump sum or a number of payments available to the outgoing CEO is fair and appropriate, stakeholders in the nonprofit may see things differently. Anything that promotes clarity between a CEO and a board of directors is a good thing.