Employment Agreement - CEO - Chief Executive Officer

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Introduction

The CEO is responsible for managing and coordinating all activities of a business; because of this, it controls, for all practical purposes, the destiny of the business he leads. The legal relationship established between a CEO and the business should reflect the importance of the role entrusted to the CEO. The improper management of such a sensitive position can cause huge consequences, including the eventual bankruptcy of the business.

Given its importance within a company, the best management practice requires the establishment of a solid framework for such position. The following document, in its annotated version, explains the most important legal, administrative and financial components related to this position within the business.

Description

The Employment Agreement for the Chief Executive Officer is the legal instrument by which a CORPORATION / COMPANY, hires a person called the Chief Executive Officer, in order to entrust to the latter the monitoring of all activities of the COMPANY / CORPORATION. This instrument is used to establish the respective obligations of the parties, so as to govern their relationship.

Use

In Canada, there are no legal provisions requiring an employer and an employee to sign a formal contract of employment. A simple verbal agreement is sufficient to establish the contractual relationship of employment, which will be subject to the applicable law. But the latter does not provide an adequate, custom-made legal framework to meet the specific needs of the parties.

To illustrate this statement, we refer to the issue of delegation of authority to the managers of a company. Under the applicable law of Quebec and Canada, the absence of a written contract setting out limits of such delegation may be problematic for a company whose leaders have too much freedom in the exercise of their executive powers.

Two types of instruments can be used to evidence an employment relationship. They are the employment letter and the employment agreement. The employment letter is limited to stating the general conditions of employment without giving details. The employment agreement, on the other hand, is intended to govern, precisely and in details, the relationship between employer and employee. Given the important role that the Chief Executive Officer is expected to play in the COMPANY / CORPORATION, it is important not to leave anything to chance in the construction of the contractual relationship. Although contractors may use our sophisticated template of employment letter (document C03.250 of the Business Precedents), we prefer, without a doubt, to use the employment agreement since it allows much more detail in the establishment of such legal relationship.

Furthermore, it should be kept in mind that the contract is primarily a negotiating tool. Also, its contents can vary depending on what is agreed with the person concerned. However, the contract presented below shows the most fundamental aspects of this type of relationship. It can therefore serve both as a negotiating framework and to help with drafting the employment agreement of the Chief Executive Officer.

It should be noted that the legal content of this instrument has been designed according to the laws of the province of Quebec, Canada. Any proposed use of this document for a court other than the province of Quebec requires validation of its content by an attorney practicing in such jurisdiction.

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