Breach of executive compensation agreements can lead to lawsuits

Illinois executives negotiate compensation packages that include a variety of bonuses and incentives. Many executive compensation agreements are worth millions of dollars to the executives that sign them. When one of the parties to an agreement fails to perform in accordance with its terms, a lawsuit may be filed.

This was the case with an executive working for Patron Spirits International Inc. After co-founding Paul Mitchell -- a line of products for hair care -- the executive joined Patron Spirits. When the company's co-founder died, the remaining founder asked the executive to stay with the company to build and manage its tequila operation south of the border. As part of his compensation package, the man claims he was to receive a bonus calculated from any increase in value the company received as a result.

The executive claims the success of the Mexican company, Patron Tequila, is largely his doing, so he should have received a bonus that is currently estimated to be nearly $70 million. However, he says he never received that bonus and filed suit against his former employer. His employment was terminated in 2008 -- the year prior to the filing of the lawsuit -- due to alleged misconduct and sexual harassment. The parties recently settled the case for an undisclosed amount after the trial that began in March was put on hold.

It is not known whether his contract stipulated the receipt of any bonus if he was fired. When Illinois companies are negotiating executive compensation agreements, it may be beneficial to negotiate to include language regarding what happens in the event the executive is terminated for cause or otherwise leaves the company in violation of the agreement. This could help prevent future litigation like that filed in this case.

Source: Echo Park-Silver Lake, CA Patch, "Patron Tequila and Former Executive Settle Unpaid Bonus Lawsuit", Michelle Mowad, May 2, 2014

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