What Should a Company Do Before Terminating an Executive?
Before terminating an executive, a company should understand exactly what it has promised and plan the exit as carefully as the decision. Key steps include:
- Review every governing document. The employment agreement, severance policy, equity and bonus plans, and any restrictive covenants will shape what the executive is owed and what the company can require.
- Check the record for consistency. Performance reviews, bonuses, and recent praise that contradict the stated reason for termination are common sources of litigation risk.
- Prepare the separation agreement in advance. Having fair, clearly written terms ready shows good faith. For an executive age 40 or older, a waiver of federal age-discrimination claims must meet Older Workers Benefit Protection Act requirements. In an ordinary individual separation agreement, this generally includes at least 21 days to consider the waiver and 7 days to revoke after signing; group termination programs generally require at least 45 days and specified disclosures. Different rules apply to settlement of a filed charge or lawsuit. Counsel should confirm the requirements for the specific agreement. See the EEOC guidance.
- Involve experienced employment counsel early. A short review before the meeting is far less costly than a dispute afterward.
Should a Company Terminate an Executive “For Cause”?
Before relying on a for-cause termination, a company should ask what it truly needs to protect. Often it is the decision, not the label.
Many executive agreements define cause narrowly and require notice and an opportunity to cure. A “for cause” designation can save the severance owed under the agreement, but it also carries a heavy cost. It reads as an accusation, it can follow the executive into every reference check, and it gives the executive a strong reason to challenge it in court. If the facts look more like a performance disagreement than misconduct, the label may invite exactly the litigation the company hoped to avoid.
The company can stand firmly behind its decision to part ways without attaching a label that the executive will feel compelled to fight.
How Should the Executive Termination Conversation Be Handled?
How an exit is handled matters as much as the decision itself, because it determines whether the executive experiences the termination as a business decision or a personal attack. Senior leaders define themselves heavily by their reputation. When they feel publicly diminished, a lawsuit can start to look like the only way to defend their name.
- Have the decision maker deliver the news. For a senior leader, hearing it from the CEO or board chair, with HR present, signals respect.
- Be clear and direct. State that the decision is final, give a short business reason, and avoid debating it in the room.
- Avoid a public walkout when possible. A same-day security escort past colleagues is rarely necessary for a senior leader and is often remembered for years.
- Provide the terms in writing. Give the executive the separation agreement and the time required to review it with counsel. Pressure to sign quickly breeds resentment and later challenges.
A respectful exit does not require weakening the decision. It means planning the conversation, controlling who learns what and when, and allowing the executive to leave with their dignity intact.
What Do the Company and the Departing Executive Each Need?
When an executive separation turns into a dispute, it is usually because each side assumed the other wanted something very different. In my experience, their core needs overlap far more than either expects.
A company needs the exit to be final, orderly, and quiet: a signed release, protection of the decision, a smooth transition, confidentiality, and no public dispute. A departing executive needs to leave with their reputation intact and a clear path to the next role: dignity, a say in how the departure is described, a fair reference, a financial bridge, and time to review the terms.
A carefully negotiated separation agreement can sometimes accommodate these interests, subject to applicable law and the circumstances.
| Shared interest | What the company gains | What the executive gains |
|---|---|---|
| Agreed departure message | No public dispute or confusion | Control over how the exit is described |
| Reference protocol | Consistent, low-risk responses | Protection in the job search |
| Mutual non-disparagement | No negative statements from a former leader | No negative statements from the company |
| Fair severance and release | Finality and closure of claims | A financial bridge to the next role |
| Confidentiality | Business information stays private | Personal details stay private |
| Orderly transition | Continuity for the team | A professional final chapter |
A few practical points make these terms work. Agree on short, neutral announcement language, such as “has left the company” or “is stepping down,” since references to performance or conduct rarely stay internal. Name one contact who will confirm dates and title for prospective employers. Tie the company’s non-disparagement commitment to specific senior leaders who can actually honor it. Consider outplacement support or the option to announce the departure as a resignation. Some of these terms may be low-cost ways to address reputational concerns, but confidentiality, non-disparagement, and release provisions must be tailored to applicable labor and employment law and cannot restrict protected rights.
When Should a Company Use Mediation for an Executive Separation Dispute?
Addressing an emerging executive dispute early can preserve options and potentially reduce cost. Mediation does not have to wait for a lawsuit. If a departing executive has retained counsel, is contesting a cause determination, or is unwilling to sign a separation agreement, that is often the right moment. At that stage, positions are still forming and no one has spent heavily on discovery.
A neutral may be able to explore concerns that are difficult to raise in direct negotiations. In a direct negotiation, the company may hesitate to show flexibility and the executive may hesitate to admit that reputation matters more than money. In private sessions with a mediator, both can speak candidly about what they actually need, such as protecting a decision or protecting a reputation, without either side appearing to blink. That candor is often what turns a stalled severance negotiation into a signed agreement.
The Exit Is Part of the Decision
Companies spend a great deal of time deciding whether to release an executive and very little deciding how. In my experience, the how is often what determines whether the next conversation happens at a conference table or in a courtroom. A fair, well-planned executive exit protects the reputations of both the company and the executive, and it may reduce the likelihood of avoidable disputes and reputational harm.
Organizations and their counsel considering an executive separation or facing a stalled severance negotiation may wish to explore whether early neutral mediation is appropriate.
Sheri L. Mooney, Esq. brings experience in employment litigation, senior corporate leadership, and executive coaching to her mediation practice. As mediator, she does not serve as legal adviser or coach to either side.