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Should you demand your stock options in a severance package?

On Behalf of | Oct 18, 2021 | Employment Contracts |

Taking an executive position at a big company means a lot of responsibility. Your new position often involves a lot of paperwork. After all, as a high-earning professional, you need to protect yourself  — and the company wants to limit its liability and the risk to its trade secrets. 

When the company first hired you, you probably agreed to certain terms in your employment contract. Although Michigan is an at-will employment state where either a worker or a company can sever an employment relationship for any cause or even no cause, companies generally do still need to uphold their promises regarding several when they let workers go before the end of their contract. 

If stock options are part of your severance agreement, how do you ensure that you receive what is fair and appropriate? 

It can be hard to put a price on stock options

Stock options offered as a perk of employment often come with certain terms attached. You may have to work for the company for a certain amount of time, meet certain performance metrics or wait a specific number of years before you attempt to convert the options to actual stock. What your stock option is worth will depend on the company’s trajectory and numerous other factors, but it could be thousands of dollars in future income. 

Some people focus more on securing promised bonuses or severance salary payments rather than stock options, but the stock options may actually represent more money in the long term. Reading the terms of your severance package in your employment contract can be a good starting point if you expect to have to negotiate for your compensation.

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