Terminating A CEO For Cause

Terminating a CEO "for cause" requires that the board of directors ("Board") of the employer focus on two questions - What is the applicable standard for cause? Do the facts and circumstances satisfy this applicable standard?

The consequences of a "for cause" termination can be severe, with the former executive forfeiting equity awards, having to repay previously paid incentive compensation (the "claw-back"), losing severance benefits and having vested stock repurchased at a punitive price. Reported circumstances of cause terminations are infrequent. Often this is because the battle takes place in confidential arbitration proceedings or disputes are settled confidentially, after the "cause" card has been played.