Top brass hiring's a weighty affair
The document, announcing a top executive’s appointment into a company is gathering reams of attention. India Inc has started to spend more time on the drafts of employment contracts for top level hiring.
By Bhanu Pande, TNN |
NEW DELHI: The document, announcing a top executive’s appointment into a company is gathering reams of attention. India Inc has started to spend more time on the drafts of employment contracts for top level hiring. So are the executives, who are being hired.
The document which never sought to look beyond compensation and standard work conditions, in the ’90s, is increasingly becoming a matter of big deliberation before the two sign on the dotted line. Arriving at the mutually acceptable employment contract in leadership positions today, is akin to an M&A transaction in complexity, long-term financial and contractual implications for both, company as well as the executive being hired.
Organisations are ring fencing their senior executives by devising wealth creation opportunities in the form of incentives, retention pay, stock plans and deferred bonus plans. They have too much at stake, and are careful on what goes into the contract. Business leaders are also demanding safeguards for themselves.
An executive search firm says, another client is now demanding the same clause for hiring a CEO. Atul Vohra, managing partner, Transearch, says employment contracts have become a risk mitigation tool in the hands of top executives who are in demand. “With more opportunities chasing fewer leadership talents, high-profile executives and CEOs are demanding their pound of flesh,” he says. “They want all this written.”
Take the case of Rajat Jain, who is now the MD of Walt Disney India. When Mr Jain quit a telecom company to join a satellite telephony project in his career, he demanded that the latter incorporate what is called ‘golden parachute’ clause as the project he was to head was risky, involving serious technical and regulatory issue beyond the management control. The recruiting company agreed.
“The days of one-sided employment contracts are over,” says Mr Jain. “Also with increasing risks, the returns need to be commensurate with the opportunity. In high-risk projects and technologies, the risk of the company changing its business plan midway, for no fault of anyone, needs to be considered and covered. Golden parachute is only one way.”
Organisations today are moving away from a ‘one size fits all’ approach, while structuring compensation and employment contracts. “The days of standard templates for appointment letters are gone. At very senior levels, we are seeing the emergence of ‘super lawyers,’ who counsel senior executives and negotiate on their behalf,” says K Sudarshan, managing partner, EMA Partner International.
India Inc is also witnessing instances of senior executives walking out of contracts or accepting more than one contract. One company insisted on a penalty clause in the event that the executive reneges on his contract. “In the instance where a candidate for top position asks for a joining period of six months, his declining to join in the fifth month could be a huge cost to the hiring company,” says an HR head, which faced the situation himself.
The document which never sought to look beyond compensation and standard work conditions, in the ’90s, is increasingly becoming a matter of big deliberation before the two sign on the dotted line. Arriving at the mutually acceptable employment contract in leadership positions today, is akin to an M&A transaction in complexity, long-term financial and contractual implications for both, company as well as the executive being hired.
Organisations are ring fencing their senior executives by devising wealth creation opportunities in the form of incentives, retention pay, stock plans and deferred bonus plans. They have too much at stake, and are careful on what goes into the contract. Business leaders are also demanding safeguards for themselves.
An executive search firm says, another client is now demanding the same clause for hiring a CEO. Atul Vohra, managing partner, Transearch, says employment contracts have become a risk mitigation tool in the hands of top executives who are in demand. “With more opportunities chasing fewer leadership talents, high-profile executives and CEOs are demanding their pound of flesh,” he says. “They want all this written.”
Take the case of Rajat Jain, who is now the MD of Walt Disney India. When Mr Jain quit a telecom company to join a satellite telephony project in his career, he demanded that the latter incorporate what is called ‘golden parachute’ clause as the project he was to head was risky, involving serious technical and regulatory issue beyond the management control. The recruiting company agreed.
“The days of one-sided employment contracts are over,” says Mr Jain. “Also with increasing risks, the returns need to be commensurate with the opportunity. In high-risk projects and technologies, the risk of the company changing its business plan midway, for no fault of anyone, needs to be considered and covered. Golden parachute is only one way.”
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Organisations today are moving away from a ‘one size fits all’ approach, while structuring compensation and employment contracts. “The days of standard templates for appointment letters are gone. At very senior levels, we are seeing the emergence of ‘super lawyers,’ who counsel senior executives and negotiate on their behalf,” says K Sudarshan, managing partner, EMA Partner International.
India Inc is also witnessing instances of senior executives walking out of contracts or accepting more than one contract. One company insisted on a penalty clause in the event that the executive reneges on his contract. “In the instance where a candidate for top position asks for a joining period of six months, his declining to join in the fifth month could be a huge cost to the hiring company,” says an HR head, which faced the situation himself.
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