Executive Compensation and Divorce
C-suite executives often receive a variety of compensation packages beyond traditional salary and bonuses. Many of these benefits are incentive-based, designed and intended to align the executive’s interests with those of the company's shareholders and the company’s overall performance. Tying part of executive pay to certain metrics may encourage executives to focus on achieving goals that are important to the company's overall success. The programs can include non-qualified plans, which are not subject to the same regulations and limitations as more conventional qualified retirement plans like 401(k)s.
Common types of non-qualified plans promise to pay the executive a certain amount of money at a future date, often upon retirement or termination of employment. They may be tax-deferred, so the executive does not receive tax consequences until the funds are distributed. Other plans include Incentive Stock Options granting the executive the right to buy company stock at a predetermined price (often lower than the market price), or Non-Qualified Stock Options Restricted Stock Units granting the executive a right to receive company stock at a future date, typically subject to vesting requirements.
Executives may also be promised other forms of performance-based compensation in the form of bonuses or awards tied to company success, again, designed to incentive performance and reward executives for achieving specific goals or metrics.
An expert is often needed to find and value executive compensation plans in a divorce involving a C-suite executive. Executive compensation packages often include a variety of complex financial instruments, such as stock options, restricted stock units, performance-based bonuses, and deferred compensation plans. These plans can be difficult to understand and value without specialized knowledge. Executives may receive compensation that is not readily apparent from their W-2 forms or other standard financial documents. An expert can help identify and value these hidden benefits, such as company-paid expenses, perks, or deferred compensation arrangements. In the event of a contested divorce, an expert can provide valuable testimony and evidence to support the valuation of the executive compensation plans.
