The largest severance package ever reported soared over a billion dollars, and yes, you too have the power to negotiate a severance package. Here’s how and why.
Throughout my career, I’ve encountered skepticism from mainly three types of people when it comes to severance negotiations. First, there are those who see their employers almost as sacred, vowing never to negotiate a severance, seemingly unaware that companies often lay off employees when economic times get tough. Then, there are those who undervalue their contributions to the company, hesitant to ask for severance because they don’t think they deserve it. Lastly, there are those who think they’re indispensable, finding it hard to imagine why a company would ever pay them to leave.
What they all miss is that being valuable gives them leverage. No company wants to lose a top performer without a backup plan. By showing a willingness to negotiate, you open the door to securing a beneficial exit if you’re planning to leave, change careers, or simply take a break.
My own journey with severance started when I left my job at 34, armed with a severance package that allowed me to travel, start new ventures, and build Financial Samurai. Without that financial cushion, I would have continued grinding away in a job that brought me stress and unhappiness.
One of the most staggering examples of severance negotiation involved Adam Neumann, founder of WeWork, who negotiated an approximate $1.7 billion exit package with SoftBank. Although the real take-home amount was subject to various adjustments, including legal fees and loans, the deal still illustrates the high stakes of executive-level severance deals.
A severance package, or separation agreement, isn’t just handed out; it’s often negotiated under specific circumstances, particularly when there’s no fault on part of the employee. In industries like investment banking, severance might also include deferred compensation, which is designed to retain employees but can be negotiated if leaving the company.
However, Neumann’s severance from WeWork was a different ballgame, reflecting not just a negotiation but also the complexities of corporate governance and investment valuations. Despite the controversies surrounding his leadership and the company’s failed IPO, Neumann’s severance negotiation underscores the potential financial rewards of understanding and leveraging corporate equity and investment dynamics.
Severance deals can vary widely, from high-profile CEOs to average workers. For instance, Jack Welch of GE and Les Moonves of CBS negotiated severances in the hundreds of millions, underlining the importance of negotiating your exit strategy rather than simply quitting.
Severance negotiations reveal not just what you’re leaving behind but also what you might be entitled to based on your contributions and the terms of your employment. Whether it’s through a high-stake negotiation like Neumann’s or more modest, every employee has the potential to negotiate terms that recognize their value and contributions.
