Compensating the CEO of a Single Family Office
This edition of the Family Office Association Newsletter features insights on compensating the CEO of a SFO by Henry C. Blackiston, Esq, Senior Counsel Seyfarth Shaw LLP
As a family member responsible for a single family office, assume you have just hired the ideal candidate to be the CEO – he or she is smart, personable, with great communication skills and with the background and maturity to manage all the multiple issues that can arise in operating the SFO. But the next challenge is how to mo vate that person to stay for many years and to focus on the interests and goals of the family, while still protecting the interests of the family.
There are as many answers to this questions as there are family offices, but the purpose of this article is to briefly touch on some common ways to meet such a challenge.
A. Employment Agreement
Probably the first task is to negotiate a proper employment agreement, preferably before the individual is hired, which protects the CEO from arbitrary termination, properly defines the CEO’s duties and compensation, and also protects the family through appropriate restrictive covenants and “golden handcuffs.” Since a SFO is a unique environment where data regarding compensation and other matters for other families is not readily available, benchmarking proposed terms against informa on “on the outside” with public companies, and perhaps other professional service rms, becomes important. The essential ingredients of a well thought out employment agreement include the following:
1. Duties. The responsibilities of the CEO should be detailed and ideally a job description should be referred to and attached. Since the role of a CEO can vary greatly depending on the family’s needs, this becomes important. The primary function may be money management, coordination of an existing staff, client services, educa on of the next generation, development and implementation of a strategic plan, coordination of outside counsel and other advisors, or all of the above. Specifying the CEO’s role in some detail makes it easier for the CEO to mange the family’s expectations and makes it easier for the family to review performance. This sec on should also specify to whom the CEO reports, whether it be a Board, Trustees of family trusts or a senior family member. This insures proper communication of issues between management and the family.
View the Newsletter in full: Newsletter: Compensating the CEO of a Single Family Office