What to watch for with CEO contracts.

Note these 10 items of particular concern.

Employment contracts are becoming more the norm than the exception for chief executive officers in the association community. On the assumption that most association executives are familiar with common features of these contracts, here is a refresher

CEO contracts typically cover 10 areas of particular concern.

1. Compensation. Federal legislation passed in 1993 limits the amount of income that can be recognized in accruing retirement benefits in federally qualified pension programs. Many more recent association CEO contracts attempt to address and remedy the problem, which results in inequitable treatment for higher-paid CEOs. Among the possibilities are a separate increase in current salary or in post-employment severance; consulting or deferred compensation arrangements; or whole lite insurance. Any of these can reflect the value of retirement benefits lost through the 1993 legislation.

2. Personal use of automobile. Internal Revenue Service requirements make clear that personal use of an employer-provided automobile, including routine commuting use, may be considered taxable income for the employee. Here again, consider ways to manage that tax liability in the context of the employment agreement, such as by providing for CEO reimbursement to the association for the estimated value of any personal use of the automobile.

3. Spouse travel. Recent final IRS regulations make it more likely that reimbursement by an association for travel expenses of the CEO's spouse will be considered taxable income to the CEO except in unusual circumstances. The employment contract can deal with this problem by providing for an increase in the reimbursement to the CEO to account for the taxation of the spouse's reimbursed travel expenses.

4. Management. It is ordinarily in the best interests of both the association and the CEO for the contract to provide for the CEO's exclusive authority over engaging, advancing, compensating, assigning, and terminating all other employees so long as budget and legal restraints are observed.

5. Contract versus bylaws. Conflicts can sometimes arise between provisions in a CEO contract and provisions in the association's bylaws or other governing documents. Resolve these conflicts before entering into the employment contract.