Considerations for An Executive Seeking Divorce
There are unique challenges executives and other highly compensated individuals face during divorce. Child custody issues are more difficult due to job demands and frequent travel that compete with parenting time. Also, executive compensation is often in flux and tied to the company’s financial performance. An executive seeking divorce in California faces many issues pertaining to complex SEC considerations, public disclosure, insider reporting, and other privacy matters.
In addition to base salary, executives receive accrued benefits, contingent payments, performance-based long-term incentives, and performance-based incentive bonuses. Indeed, an executive’s pay is structured to reward them for the company’s performance and shareholder value on an annual basis. The pay these employees receive is always at-risk year-to-year unlike other employees. Sometimes they never receive it and other times they stand to gain a huge payout if company performance exceeds expectations.
Stock option apportionment is usually an important issue. Many executives acquire stock option and restricted stock unit grants; at divorce, they may have vested equities and some yet to vest. Determining how equity incentives are apportioned between separate and community estates becomes more complex when grants are received prior to marriage and vest during the marriage.
Spousal Support and Attorneys’ Fees
Determining spousal and child support requires more documentation and analysis in these cases. Income can be a moving target due to performance-based incentives and pay. Furthermore, these clients are often the breadwinner in their family, raising additional issues. A highly compensated client faces long-term spousal support (alimony) based on the parties’ marital standard of living that may last indefinitely. These clients may also be required to pay a portion of any compensation received above base pay as additional child and/or spousal support.
If the supporting parent has incredibly high monthly income, they may be considered an “extraordinarily high-income earner.” Usually, child support is calculated by a state-mandated formula that generates a “guideline child support” figure. When representing an extraordinarily high-income earner, counsel may argue that child support should deviate below guideline because the standard formula will generate a support order that is excessive and well beyond the child’s needs.
These clients may face the prospect of paying the other party’s attorneys’ fees and costs in addition to their own. Executive clients usually hire a forensic accountant for their divorce and may be ordered to pay for the other party’s experts as well. After considering the costs, it should be apparent that executive clients have an interest in streamlining the divorce process.
Protecting the Privacy of Prominent Executives Seeking Divorce
If a client is in a prominent position at a publicly traded or well-known company, privacy is also a serious concern. The spouses of executives are also tied to the executive’s employment situation. The executive’s personal life may even have an impact on the company if there’s a divorce. In fact, if there is a conflict, there could be embarrassing details about the executive’s private life exposed in public that could jeopardize both their job and the company’s stability. The executive spouse likely knows insider information and trade secrets that must not be exposed. In high-profile cases, shareholders may respond in a negative way and hurt the company’s growth. Also, the executive’s holdings in the company may shift after the divorce and they may lose a controlling interest.
To address these concerns, great avenues to take in these cases are (1) stipulating to appoint a private judge to hear the case in a private setting, or (2) mediating the case.
Private judges are appropriate when parties cannot agree on all issues but wish to stay out of the public courthouse. Parties have more access to a private judge, can hold hearings and settlement conferences in a private office, and may eliminate the number of total hearings required. Litigating privately will help keep dirty laundry and sensitive financial information out of the courthouse and public record. Private judges are an additional expense but can save the parties time, money, and reduce the list of exposure in the long run.
Divorce mediation is another great alternative for divorce in California. Mediation and all negotiations are confidential and privileged in California. If the parties settle the entire case with a divorce mediator, the case is addressed privately, statements and documents used in the course of mediation cannot be used as evidence in a later proceeding, and they minimize the number of documents filed with the court. Mediation is generally less expensive than litigation. More importantly, mediation may keep conflict and hostility to a minimum, which is ideal for parties who are co-parenting children.
To take advantage of these alternatives or reduce the number of litigated issues, retain counsel early. Immediately work with a divorce lawyer to assemble a great team of experts. Experts in these cases may include, but are not limited to, forensic accountants, mental health professionals to assist with contested custody and visitation matters, business attorneys, vocational evaluators to determine the earning capacity of the supported party, and appraisers for real estate, valuable collections, and other personal property.
The Approach for An Executive Seeking Divorce
When an executive’s divorce is imminent, steps should be taken to avoid compromising their position, the business, or its value. It’s important that the married or recently separated executive lay out a plan that will help keep the divorce from also affecting the company, as follows:
- Discuss with your spouse what happens if there is a divorce;
- Prepare a postnuptial agreement;
- Make an effort to keep the case out of court;
- Attempt to resolve child custody issues early on;
- Get a confidentiality agreement or protective order prior to disseminating information;
- Hire a divorce attorney to gather and exchange information before filing in the court system to minimize time spent in this public venue;
- Stay out of the public eye by resolving matters by agreement;
- Consider alternative conflict resolution methods to stay out of court; and
- Consult with an experienced family law attorney who has proven methods of streamlining these types of divorces.
Contact the Dedicated Los Angeles County and Orange County Divorce Lawyers at Johnson Attorneys Group Today
If you are an executive seeking divorce in Los Angeles County or Orange County, you need a seasoned divorce lawyer to resolve your complex family law issues related to alimony, child support, business valuation, and more. Our dedicated family law attorneys have the knowledge and compassion to handle your divorce while giving the utmost respect for both parties involved. Contact Johnson Attorneys Group in Newport Beach and Los Angeles to learn more.