As a lawyer who specializes in presidential contracts, I get a lot of calls from sitting presidents, like the chief executive of a nonprofit group who came to me recently for assistance. She is in the final year of a three-year employment agreement that is scheduled to expire on June 30, 2011. She told me she had been successful in "cleaning up" a mess left by the prior, long-serving president, and in moving the organization's budget into the black. Nevertheless, her tenure was in trouble.
Her board chairman had informed her that some key administrators, unhappy with her leadership, were on the verge of resigning. Both the unhappy staff people and some trustees blamed the president for a "morale problem." The board chairman wanted to avoid a major confrontation between the president and the board, with the attendant bad publicity. He suggested that the president accept a six-month severance package so that there could be an "amicable parting."
As Neil Sedaka suggested back in the early 60's, breaking up can be hard to do, and not just in the world of romance. Indeed, the situation I just described is one of several recent cases in which I have drafted and negotiated separation agreements between college presidents and governing boards. While such agreements have always had a place in higher education, it seems that more and more leaders are leaving as part of written agreements.
Most of the departures are relatively friendly. But in all such cases, both the president and the trustees have an interest in putting their understandings about the departure into a document to be agreed upon and signed by both parties.
The president is always the more vulnerable party in such circumstances. Presidents have both economic and reputational issues to be concerned about that will affect them, and their families, directly for quite a while.
The trustees are also concerned about economics—from the college's point of view. But whatever is agreed upon will not affect their personal finances. While boards never want to waste the resources of their institutions, in my experience they often are even more concerned about its reputation, and rightly so.
Savvy boards understand that a public confrontation with the president can affect the institution's fund raising and accreditation, as well as the board's ability to attract a top-flight successor to the presidency.
Many candidates for presidencies have shared with me their hesitancy about moving to an institution where the board fired the last leader. They appropriately wonder, "Will the board fire me, too?" Both experienced and up-and-coming administrators often choose not to risk their careers by accepting a job offer from a board that fired its last president.
It's always in the best interest of both the president and the institution to keep confidential the process of negotiating a separation agreement as well as the contract itself.
What are the major issues that ought to be dealt with in a well-crafted agreement? First, the parties need to decide on how long the incumbent president will remain in office. Sometimes it's best for everyone if the president serves until the end of the academic year, since that's the norm for presidential departures and retirements. Lots of questions are raised, both on and off the campus, when a president leaves before then. Such questions—never mind the responses—can injure the reputation of the institution, the president, or both.
Once the timing of the departure is decided, the parties must agree upon what institutional matters (such as academic, athletic, or fund-raising issues) will be handled before the president's departure, and what will be left for the successor.
Then a host of economic matters must be considered. If the president has a contract, will he or she be paid to the end of the contract term? If so, will the payout be in a lump sum, or will the payments be made over some agreed-upon period of time? Will health insurance be continued? What happens if the president obtains other full-time employment during the payout period? Will that income be deducted from the university's obligation under the contract?
What happens to the presidential house and car? Normally, once a person ceases to be president, he or she moves out, and the university-owned home reverts to institutional control. The same should be the case with the university-owned or -leased car. Exceptions will have to be negotiated.
There also may be issues concerning the president's deferred-compensation account and various insurance plans. If a presidency is terminated without "cause" earlier than originally agreed upon for the convenience of the board, the amount of money in the deferred-compensation account, as of the termination date, usually is paid out to the president. As for insurance, the key concern of departing presidents is generally health coverage. Under Cobra, the employee has the right to buy into the employer's plan for 18 months after his or her termination date. The passage of new healthcare legislation this year has not changed that.
The parties should also agree on a confidentiality provision and a mutual nondisparagement clause to be incorporated into the contract. The latter is a commitment by each party—the board and the president—to refrain from making negative statements about the other. Both sides generally waive any claims about remarks made up to the time they actually sign the separation agreement. However, everyone should take care not to defame or otherwise engage in bad behavior after the agreement is signed, because that could give rise to a new legal claim.
Presidents should not only understand what to do in the negotiation process; they should also know what not to do. One of the most important pieces of advice I give to presidents is: Don't talk to the news media. It is particularly important not to publicize that negotiations are under way, as that may derail the contract talks or cause problems for presidents later on, when they start searching for other positions.
Another no-no: Do not attempt to enlist the support of other administrators, faculty members, or university lawyers. Those people are employees of the institution and thus are required to put theinstitution's best interest foremost, even if they happen to be close friends with the departing president.
Finally, most presidents are not lawyers. It is unwise for people to attempt to negotiate on their own behalf.
Most presidencies end as scheduled, after a president has made significant contributions to the university. But even those who are leaving as planned would be wise to consult a lawyer about their departure and about how to best protect themselves financially.
Is it in my own interest as a lawyer to make that point? Of course. But let me remind every president: Colleges and universities always have one or more lawyers available to them. So it is important for you, as the soon-to-be-ex-president, to also have experienced legal advice regarding matters that can and will affect you for years to come.
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