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Negotiating Your Employment Contract and Making Sure It Is Perfect For You

Why should your would-be boss try to achieve for you, an unproven newcomer, something she's never received during nine years of loyal service and outstanding performance?

Why should your would-be boss try to achieve for you, an unproven newcomer, something she's never received during nine years of loyal service and outstanding performance?

Seen through her eyes, your asking for a "contract" seems presumptuous, if not downright unreasonable. Fortunately, there are several rejoinders you can make, and I'll lay them out for you.

But don't blunder into arguing for a "contract," when an "offer letter" will work equally well, and be vastly easier to get. The trick is to find out in one of your earliest discussions...long before you begin "negotiations"...whether the company uses "employment contracts," and whether they're willing to give you one. If not, don't even bring up the subject later on. Just assume your way into an "offer letter" that covers the same ground.

But suppose...for whatever want to get a mutually signed document labeled "Employment Contract" out of a company that traditionally refuses to give them. Here are the arguments you can use:

  1. "It's a logical, businesslike approach to a business matter.

    People die and move on, and memories fade. A written agreement is the obvious safeguard."

  2. "More and more companies are writing 'employment contracts' for senior managers these days." Some estimates and surveys suggest that over 50% of America's largest corporations now enter into formal written agreements with a substantial number of their executives.

  3. "I have an 'employment contract' at my current company, and I appreciate the security it provides. It's just one of many advantages, and I don't feel like moving to another company and getting less on any score than I've got now."

  4. "With today's business uncertainties, all executives are more reluctant to move than ever before. I believe that it's important for your company to rethink its policy against giving contracts. Not only do I want one. But I'll also be trying to recruit other outstanding and well-situated executives to work for me here. Being able to give them the reassurance of a contract will be very helpful."

  5. "Moreover the company can extract some important concessions from the executives it has under contract. We can put reason able restrictions on their ability to walk out and leave us in the join our direct reveal our trade be paid for work other than ours in their spare time...and so forth. Besides helping us get people, our contracts can help us get what we want out of them."
There you have your strongest pro-contract arguments. Use them as you see fit.

If you do wind up negotiating a formal employment contract, lawyers will be involved on both sides. Don't underestimate their prodigious ability to destroy a good deal for you.

I've seen it over and over. An executive gets a once-in-a-lifetime opportunity. In a love-feast of seeing eye-to-eye on absolutely everything, the prospective employer and employee "let the lawyers take over from here." Far from merely "getting things down on paper" or "tying up loose ends," as the happily mated principals expect, the result is total destruction of the deal.

Here are a couple of examples. Names, of course, are changed to protect the foolish.

Len was President of a $350 million group of companies owned by a $18 billion conglomerate. I recruited him to join a far more prestigious $8 billion corporation as President of its $1.2 billion group of similar companies. He wasn't and never would be a corporate officer of the $18 billion company, because his businesses were insignificant to its volume. At the $8 billion company, on the other hand, he'd head one of just four "Groups," and he'd be a corporate officer and a Director.

Len and the CEO readily agreed on every thing...salary, duties, directorship, generous participation in incentive programs, and a fistful of stock options. So the CEO supplied a contract, which Len had a week to check out with his lawyer.

On the second-last day, Len phoned me. He was at the office of a prominent attorney used by his sister, a world-famous entertainer. "I don't know what to do, John. I'm getting way more than at X corporation, but this guy points out that it's quite a bit less than the other three Group Officers make. He wants me to ask for more."

I told Len it was too late. The CEO would tear up the contract, if Len went back on his word. And besides, Len was becoming one of five top officers and a board member. Any inequity would be corrected as Len proved himself through performance, and increased the relative size of his group through internal growth and acquisitions. "Attack any other wording of the contract on advice of counsel, but don't let him make you look sleazy and indecisive," I told Len.

"You're right, of course," said Len. "But would you mind coming over here and saying the same thing? This fellow is a close friend of our family. He's an expert, and he's charging me far less than he normally gets. So I don't want to just casually dump on the advice he's giving me."

Shocked...and concerned that the CEO and I had both made a mistake in selecting this otherwise brilliant and successful executive...I walked four blocks and took an elevator 38 stories to the intimidating opulence of the great lawyer's office. The guy was a sleaze! And he was encouraging Len to be one, too. Nevertheless, I spoke diplomatically.

Len did not return his contract as he should have the following day. Nor did he call. After the weekend and two days of the next week rolled by, the CEO and I agreed that I should call Len...hear a good excuse if he had one...and if not, tell him the deal was off. Len may have been advised to await a panicky call from us offering more money. That did not happen. And the deal was off.

Less than a year later, Len's conglomerate divested his unit to a company that didn't need his services. He's had other jobs in the several years since. But none as good as the one he was forced out of. And none even remotely as good as the chance-of-a-lifetime job on which he gave his hand-shake acceptance...and then asked his lawyer to check his contract.
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