Executive Severance Policy Example – Sabbatical and Career Break Policies

Executive Severance Policy Sample

In this article, we’ll look at the key elements that make up an example Executive Severance Policy. We’ve included some starter/boilerplate information to help you get started writing this policy for your company. If you’re looking for help in setting up your policies & procedures or employee manual/handbook, our team can assist.

Executive Severance Policy Template

The following are the main elements that should be included in your Executive Severance Policy:

1. Title Page

• Policy Title: Executive Severance Policy
• Company Name: The name of the organization implementing the policy.
• Policy Number (if applicable): For easy reference within the company’s policy structure.
• Version Control: Date of creation, last review, and version number.
• Effective Date: The date the policy becomes operational.
• Approval Authority: Name and title of the individual who approved the policy.

2. Purpose/Objective

• A brief statement explaining why the Executive Severance Policy exists. This section outlines the policy’s purpose in relation to the company’s goals, regulatory requirements, or ethical standards.
• Describe what problem or issue the policy addresses.
• Example Purpose/Objective:

The Executive Severance Policy aims to establish clear guidelines for providing severance payments to executives upon their departure from the company. It ensures a fair and consistent approach to handling executive exits, aligning with corporate governance standards. The policy seeks to protect the interests of both the company and its executives by detailing eligibility criteria, payment structures, and conditions under which severance is granted. By doing so, it promotes transparency and accountability, supporting smooth transitions and maintaining organizational stability

3. Scope

• A description of who the Executive Severance Policy applies to (e.g., employees, contractors, vendors).
• Specify any exceptions to the policy.
• Explain departments or roles affected, if necessary.
• Example Scope:

This policy applies to all executives eligible for severance payments upon their departure from the company. It details the specific terms and conditions that govern these payments, ensuring clarity and consistency in the process. The policy is part of the broader Corporate Governance Policies, aiming to provide a structured approach to executive transitions. It ensures that both the company and the departing executives understand their rights and obligations, promoting fair treatment and compliance with corporate standards

4. Definitions

• Clarify any key terms or jargon used within the Executive Severance Policy to ensure understanding.
• Avoid assumptions about familiarity with industry-specific terminology.
• Example Definitions:

The Executive Severance Policy defines key terms related to severance payments for departing executives. “Cause” refers to reasons for termination such as misconduct or policy violations. “Good Reason” includes significant changes in job duties or compensation. “Severance Benefits” encompass payments and benefits provided upon termination. “Change in Control” involves significant shifts in company ownership or structure. “Notice Period” specifies the required time before termination. “Release” is a legal agreement waiving claims against the company. These definitions ensure clarity and consistency in applying the policy

5. Policy Statement

• A detailed outline of the Executive Severance Policy itself, including all rules, expectations, and standards.
• It should be direct and clear so that it leaves no ambiguity about the company’s position or requirements.

6. Procedures

• Step-by-step instructions on how to implement or comply with the Executive Severance Policy.
• Include any forms, tools, or systems that employees must use.
• Describe the responsibilities of different roles in ensuring adherence to the policy.
• Example Procedures:

Executives eligible for severance must meet specific criteria outlined in their employment agreements. Severance payments are calculated based on tenure, position, and reason for departure. Executives must sign a release of claims against the company to receive benefits. The policy excludes those terminated for cause or who voluntarily resign without good reason. Severance may include salary continuation, bonuses, and benefits coverage for a defined period. The board or a designated committee reviews and approves all severance agreements to ensure compliance with corporate governance standards

7. Roles and Responsibilities

• List the roles responsible for enforcing or overseeing the Executive Severance Policy (e.g., managers, HR).
• Define who is accountable for reporting, monitoring, and updating the policy as needed.
• Example Roles and Responsibilities:

The Executive Severance Policy assigns specific roles and responsibilities to ensure its effective implementation. The Board of Directors is responsible for approving the policy and any amendments. Human Resources must administer the policy, ensuring compliance and maintaining records. Legal Counsel provides guidance on legal implications and ensures alignment with applicable laws. Executives are required to understand the terms and conditions of their severance agreements. The Finance Department manages the financial aspects, including budgeting and processing payments. Regular reviews are conducted to ensure the policy remains relevant and effective

8. Compliance and Disciplinary Measures

• Outline how compliance will be monitored or enforced.
• Describe any consequences or disciplinary actions for failing to follow the policy, including the escalation process.

9. References and Related Documents

• Include links or references to any laws, regulations, or company guidelines that support the Executive Severance Policy.
• Reference related company policies that connect or overlap with the document.

10. Review and Revision History

• State the review cycle (e.g., annually, biannually) and who is responsible for reviewing the Executive Severance Policy.
• A history section that lists all revisions made to the document, including dates and reasons for changes.

11. Approval Signatures

• Signature lines for key decision-makers who have authorized the policy (CEO, department head, HR manager).

12. Appendices or Attachments (if needed)

• Additional information, FAQs, or case examples to provide more context or clarify how the Executive Severance Policy applies in specific situations.
• Any relevant forms or templates employees need to complete.