Latest / Executive Careers with Fexingo: VP, C-Suite, and Senior Leadership Career Strategy / How Senior Leaders Negotiate Their Own Severance
Transcript
- Lucas: Let me start with a number that surprised me. According to a 2025 survey by executive search firm Heidrick & Struggles, roughly 40 percent of senior leaders — VP and above — never negotiate their severance package at all. They sign whatever HR slides across the table. Luna: Forty percent? That seems high for a group of people whose entire job is strategic negotiation. Lucas: It does. But there's a psychological reason. Most executives — especially first-time VPs or new C-suite members — don't want to appear litigious or difficult during their exit. They think, 'I'm leaving on good terms. Let's not make this awkward.' Luna: And that costs them. I've seen it firsthand. A friend of mine — chief marketing officer at a mid-cap tech firm — was laid off in a restructuring and took the standard six months' salary. Later she learned her peer, the CFO, negotiated 18 months plus full equity acceleration. Lucas: Exactly. That disparity isn't random. It's a function of knowing what to ask for. So let's get specific. The standard severance for a VP or C-level in the U.S. right now — mid-2026 — is usually six to twelve months of base salary. Sometimes with a pro-rata bonus. But the package has three key levers: cash, equity, and what I'll call 'services.' Luna: Let's start with cash. What's the actual range? Lucas: At the VP level, two to four weeks per year of service is typical — so if you've been there eight years, maybe four months. But for C-suite, the multiplier is higher. The market norm now is one month of salary per year of service, with a floor of six months and a ceiling of 24 months. The top end usually requires a change-in-control provision or a negotiated special exit. Luna: And the equity lever — that's where the real money is. Because base salary is capped, but unvested stock can be huge. Lucas: Right. The default language in most executive employment agreements says unvested equity is forfeited upon termination without cause — unless there's a change in control. But here's the thing: you can negotiate 'double trigger' acceleration, meaning if you're terminated after a merger, or even just a restructuring, your unvested shares vest immediately. Or you can ask for continued vesting during the severance period — meaning you keep accruing equity as if you still worked there. Luna: Continued vesting. That's interesting. It's almost like a retention bonus for not working. Lucas: Exactly. And it's becoming more common. Now the third lever — the services agreement — is the one most executives miss. Instead of just taking a lump sum, you can structure part of your severance as a consulting retainer. You get paid to be available for a year. It's taxed differently — as independent contractor income — and it keeps you engaged with the company without being an employee. Luna: So you become a vendor instead of a former employee. And that changes the negotiation dynamic? Lucas: It does. Because now the company is buying your expertise, not paying you to go away. There's less stigma. And you can often get a higher total value — say, 24 months of consulting fees versus 12 months of salary — because the company budgets consulting differently from severance. Luna: Let me ask about the non-compete issue. You mentioned a CFO who got a waiver. How does that fit into severance? Lucas: The case I'm thinking of is a Fortune 500 CFO — let's call her Sarah — who left in early 2025. Her contract had a 12-month non-compete. She wanted to join a competitor immediately. So instead of fighting it, she traded away some cash severance for a full waiver. She walked away with accelerated equity, a six-month consulting retainer, and the right to start her new job two weeks after exit. Luna: So she bought her freedom with a lower cash number. That's a smart trade if the new role is significantly better. Lucas: Exactly. And that's the underlying principle of severance negotiation: it's not about maximizing every line item. It's about aligning the package with your actual next move. If you have a job offer, you might trade cash for a shorter non-compete. If you're retiring, you might trade equity for extended healthcare or outplacement services. Luna: What about the timing? When should you negotiate severance — at the start of the job or at the exit? Lucas: Ideally both. The best leverage is when you're being hired. That's when the company is excited about you. You can negotiate the severance terms in the offer letter — the number of months, the equity treatment, the non-compete scope. Once you're inside, it's much harder to change. But if you're already in the role and facing a layoff, you still have leverage — especially if your departure would cause disruption. Luna: What about the psychological hurdle you mentioned earlier? How do you overcome the fear of looking greedy? Lucas: Reframe it. This isn't personal. It's a standard business transaction. The company has a document called a 'separation agreement and release.' It's a contract. You are allowed to propose changes. The worst they can say is no. And most HR people expect some pushback — they've built in a negotiation cushion. If you don't ask, you leave money on the table. Luna: I've also heard of executives hiring a lawyer just for the severance review. Is that worth it? Lucas: Absolutely. A good employment lawyer costs maybe 500 to 1,500 dollars to review a severance agreement. They'll catch things like overly broad confidentiality clauses, non-disparagement language that could silence you from talking to regulators, or a release of claims that's too sweeping. One partner at a law firm told me that 80 percent of the executive severance agreements he sees have at least one problematic clause. Luna: And fixing those clauses can be worth tens of thousands — or more. Lucas: Exactly. Let me give you a specific example. A VP of sales I know was laid off and the agreement said she couldn't 'disparage' the company. The definition was so broad that it included any negative statement to anyone, including family. Her lawyer narrowed it to 'defamatory statements made to the press or industry analysts.' That tiny change saved her from potential litigation if she ever vented to a friend. Luna: So the key takeaway: don't sign the first draft. Ever. Lucas: Never. And I'll add one more thing. The most underused clause is the 'good reason' provision. That's language in your contract that lets you resign and still collect severance if the company changes your role, moves you, or cuts your pay. Many executives forget they have that right. If you're being pushed out indirectly, you can trigger 'good reason' and walk away with the package. Luna: Let's talk about the tax side for a second. Severance payments are usually taxed as ordinary income. Any way to optimize that? Lucas: A bit. If you can defer some of the severance into a future tax year — for example, if you're laid off in December, you can ask for the second half to be paid in January — that can lower your marginal rate. Also, if you negotiate a consulting retainer, you can set up a solo 401 and contribute up to 69,000 dollars for 2026, lowering your taxable income. Luna: So there's a strategic element even in the payment timing. Lucas: Right. And the last thing I want to touch on is the emotional side. Exiting a senior role is often a blow to the ego. You feel like you failed. But I've seen executives turn that into a catalyst. The severance package buys you runway to make a better next move — whether that's a new role, a board seat, or starting your own firm. Luna: I think that's the mindset shift. It's not a payout for leaving — it's a bridge to the next opportunity. Lucas: Exactly. And if you negotiate well, that bridge is wider, longer, and built with better materials. So to wrap up: remember the three levers — cash multiple, equity treatment, services agreement. Always get a lawyer to review. And never accept the first offer. Your career deserves that much. Luna: And if you're in a senior role today, maybe pull out your employment contract and see what your severance terms actually say. You might be surprised. Lucas: Good advice. That's all for this episode of Executive Careers with Fexingo. I'm Lucas. Luna: And I'm Luna. See you next time.