Professional Practice Statements

Employment agreements can benefit both the Association and the CEO and are consistent with prudent, professional association governance. The CEO's position responsibilities, employment conditions, and benefits differ from those of other staff positions and thus warrant an employment agreement.

Because of the link that exists between staff leadership continuity and overall organizational performance, it is in the best interest of the association to ensure stability in the CEO position. In an employment environment where the association competes with for-profit and not-for-profit organizations an agreement can help to contribute to stability. More importantly, providing a degree of employment protection through the agreement can mitigate the impact of organizational politics on operational outcomes, encouraging prudent decision making and candid communication between the CEO and the association's governing bodies.

A written employment agreement between an association and the CEO should clearly set out the mutual expectations for the association-CEO relationship. It should clarify the extent of and limitations on the executive's prerogatives and the actual employment relationship, documenting those conditions and relationships for governing bodies where volunteer members change regularly.

The agreement should clearly identify the relationship between the association and the CEO, including the responsibilities each has to the other. Ideally, the CEO should know what is expected in terms of responsibilities and performance, and the association should have a clear definition of its obligations to the CEO.

Policy Position

The Association Forum of Chicagoland believes that every association should enter into a written employment agreement with its CEO to define the employment arrangement and clearly articulate expectations of both the CEO and the association.

Professional Practices

The following issues should be considered when developing a CEO employment agreement.

Not every agreement provision described below will be appropriate in all situations, and some matters not described below may be appropriate in particular circumstances.

Legal Counsel Review. The association and the CEO should have their respective legal counsel review the employment agreement.

Term of Agreement. The agreement may specify the term of employment and/or it may simply provide that the agreement will continue indefinitely until terminated by either party as provided in the agreement.

Duties. The CEO's duties and responsibilities should be set forth in the agreement. The agreement may incorporate a separate job description and should refer to the CEO's obligations under the association's bylaws, policies and procedures.

Work Location. It is advisable to specify the location of the CEO's principal work location. Typical issues to address may include multiple offices, telecommuting and association relocation.

Hierarchy. The agreement should clearly define reporting relationships and set forth the extent and limitations of the CEO's authority.

Performance Evaluation. The agreement should provide for an annual evaluation and establish review criteria, as well as establishing evaluation procedures. (For additional detail, refer to the Forum's professional practice statement entitled "Performance Evaluation for the CEO".)

Compensation and Benefits. The agreement should specify the compensation and benefits to be provided to the CEO. In addition to salary, specified benefits may include health, life and other insurance; vacation and other leave; bonuses and incentives; deferred compensation and retirement benefits, professional memberships and professional education, and others agreed to by the parties.

Conditions for, timing and types of salary increases and other compensation changes should be specified in the agreement. These may include cost-of-living, merit and/or performance-based increases. (For additional detail, refer to the Forum's professional practice statement entitled "Performance Evaluation for the CEO".)

Death or Disability. The agreement should specify terms of how death and disability will be addressed.

Termination. The agreement should contain provisions regarding the circumstances under which the parties may terminate the agreement and the obligations of each with respect to such termination.

Termination "for cause." The association should retain the right to terminate the CEO "for cause"; e.g. actions by the CEO involving gross negligence, willful misconduct or material breach of the employment agreement, or other grounds agreed to by the parties. The agreement should include provisions for due process in which the CEO receives prior written notice of the reasons for termination and an opportunity to respond to them in a confidential hearing.

Termination "without cause." Either party should be permitted to terminate the agreement without cause upon written notice to the other. The agreement should set forth the length of notice that must be provided, as well as the rights and obligations of each party during the notice period.

Severance. The agreement should set forth the circumstances under which the CEO will obtain severance and the amount of severance that will be paid. The agreement should provide the CEO with a minimum of one year's total compensation (salary and benefits) upon termination by the board "without cause," with the ability to accrue additional severance pay depending on the tenure in the position and other contractual agreements. The agreement should also provide the CEO with comprehensive outplacement services in the event of termination, including assistance in career plan development and job searches, as well as other terms specifically negotiated by the parties.

Rights and obligations following termination. The agreement should make provision for each party's rights and obligations following termination (e.g. a requirement to return association-owned equipment, keys, and documents, confidentiality requirements, etc.).

Indemnification and other special insurance. The agreement should reflect the association's agreement to indemnify the CEO for any liability and expenses arising from the performance of his or her duties, except those involving gross negligence or willful misconduct, within the scope of controlling law.

Non-compete and confidentiality agreements. Under certain circumstances it may be reasonable for an association to include a non-compete provision in the agreement. Any such provision must be reasonable in terms of both time and geographic scope.

References

Samples of association CEO contracts may be obtained from the Association Forum of Chicagoland. The Forum's Resource Library has sample contracts developed by several law firms that specialize in association law and employment agreements.

ASAE's model association executive employment contract may be accessed on its website at www.asaenet.org/career/article/0,1387,344,00.html or from its fax-on-demand service, (800) 622-2723, request document 42009.

The following are internet-accessible information resources that deal with association CEO contracts.

"Compare and Contract" by Steven Williams, ASAE Director of Industry and Market Research. Association Management, April 2001

"Smart Contracts: What to Look for the Next Time Around" by Carole Schweitzer Association Management, May 1999

"Give a Little, Take a Little" by Margo Vanover Porter. Association Management , April 2001

"Legal: Key Elements in Association Executive Employment Contracts" by Jerald A. Jacobs Association Management, April 2000

"Rewards on the Rise" by Tracy Casteuble. Association Management , February 2000

Disclaimer

This Professional Practice Statement, developed by the Association Forum of Chicagoland, is provided as a management tool for associations and individual association executives, developed by experts in the industry, and recommended as an effective means to achieve excellence in managing associations and other not-for-profit organizations. The Association Forum of Chicagoland expressly disclaims any warranties or guarantees, express or implied, and shall not be liable for damages of any kind, in connection with the material, information, or procedures set forth in these Statements or for reliance on the contents of the Statements. In issuing these Statements, the Association Forum of Chicagoland is not engaged in rendering legal, accounting, or other professional services. If such services are required, the services of a competent professional should be sought.

Revised and Adopted June, 2003

Other practice statements

Achieving Diversity In Associations

Lifelong Learning and the Association Executive

Fiduciary and Management Duties for the Association Executive and Governing Body

Facilitation of Effective Board Decision Making

Financial Management by Association Executives

Ethical Behavior of Association Leaders

Developing a Technology Plan

Volunteer Leader and Staff Relationship

Evaluating the Performance of the Association Chief Executive Officer

Recruitment and Retention of Quality Staff