Pay and Bonus disputes

Senior executives often enjoy remuneration packages which include bonuses, long-term incentive plans (LTIPs), such as stock options and shares, and carried interest. Such forms of remuneration tend to be highly lucrative and are aimed at promoting high levels of performance and enhanced retention rates. Where LTIPs consist of shares and/or carried interest, they are likely to contain a vesting schedule which allocates percentages of shares or carried interest by reference to years of employment.  

Disputes over executive remuneration packages occur in a variety of settings, including where there has been a discriminatory dismissal which results in the loss or diminution in value of shares or carried interest due to the operation of a vesting schedule or forfeiture/clawback provisions. 

At Farore Law, we have a wealth of experience in advising clients on how to account for complex losses, whether as part of a negotiated settlement, or during litigation.  

Here are some specific examples of executive pay disputes we have recently advised on; –  

• We acted for the founders of a tech start-up which included advising the Company in managing the co-founder’s exit. The matter reached the High Court where the exited founder challenged the forfeiture of his unvested shares. The case involved a detailed analysis of the Shareholders’ Agreement and the Articles of Association to determine whether the departing co-founder was entitled to any shares in the Company.  

• We acted for an LLP member and one of the largest employee-shareholders of a professional services firm in a disability discrimination claim. A large part of his remuneration comprised of shares, which were the subject of a forfeiture and clawback provision. Following his dismissal, the entirety of his shareholding was forfeited by the employer. The matter was settled on the day before the first public hearing in the Employment Tribunal, where we managed to secure a multi-million compensation package for our client to compensate for his significant financial losses. 

• We acted for a hedge fund senior executive who sought to leave the firm after being sexually harassed by a senior partner. Her remuneration included discretionary bonuses, deferred bonuses and shares in one of the funds. Her eligibility to own shares was contingent on her remaining an employee. As part of the settlement we managed to secure compensation for the loss of her discretionary and deferred bonuses. We also persuaded the employer to place her on a lengthy period of gardening leave to enable our client to focus on her health and to ensure that she could maintain her shareholdings in the fund for a longer period of time before being required to sell. Following our client’s gardening leave, she sold her shares at a significant profit. 

• We are currently acting for a former senior executive of a finance house in a multi-million pound claim. Aside from her base salary and bonuses, she received carried interest, which is a typical form of remuneration in private equity. Our client claims that her male peers (unjustifiably) received higher salaries, bonuses and carried interest than she did; and a significant part of her losses flowed from the difference between her carry allocation and that of her male peers. This is an equal pay complaint and calculation of her losses involves a complex analysis of the figures.

At Farore Law, we are well placed to assist with employment disputes which concern executive remuneration. We have a network of contacts who are able to  advise on the tax implications of settlement agreements and provide valuations of complex executive remuneration packages.

If you would like to explore the option of instructing us for any case, please contact Rachel O’Connell or Suzanne McKie KC for further information at oconnell@farorelaw.co.uk or sm@farorelaw.co.uk

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