Coty is the multinational beauty manufacturer of brands such as: Calvin Klein fragrances, Davidoff perfumes, Adidas Bodycare, and Sally Hansen nail care products. The company has just announced that it must pay someone $1.8 million even though they didn’t actually work as the company’s CEO. How in the world can this happen? Let me explain.
- It begins with the company working hard to find a person with the talent, acumen and profile that’s required to serve as the CEO of a publicly held multinational company.
- Upon finding this person, the company convinces their candidate that the job is right for them (and they agree.)
- The hooked candidate then brings in their own attorney, or advisor, to make sure that an employment agreement is put in place. This protects the individual in case the job isn’t right, and will typically include details regarding how much pay would be received in the event that employment ends (severance pay.)
- The company and the individual will negotiate and come to an agreement on potential severance (usually somewhere around 100% of annual pay, at the least.)
- Next, the company and the individual mutually agree on a prospective initial start date. This normally includes some transition time from the old job to the new job.
- An employment agreement, listing these details, is created by the company and the individual signs it.
- The individual doesn’t start working for a while.
- The individual decides they aren’t ever going to start working.
- Both the company and the individual agree to part ways.
- Almost comically, the individual points out that the company did not require that he actually work in the position prior to the trigger of the compensation severance payment in the employment agreement.
- The company wishes it had reviewed the employment agreement, and perhaps received better advice and guidance, prior to the agreement being signed.
- The company agrees to make payment to the individual, because it has to.
- In the eyes of observers, the company does not look great.
- The individual looks great in the eyes of his friends, who will have a nice celebration with him.
- It ends with the company reviewing whether it may need a different executive compensation consultant, legal counsel or something else going forward.
So, as you can see, it is possible to make millions without ever working a day. There is no need to play the lottery, or place a wild bet. You just need to find a company who believes the best will occur, and does not properly plan for the worst.
Read the Mashable article here
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