CMO Employment Contract Tips to Protect You and Your Job

By Robert Adelson on 2 October 21   Executive Employment

This post was published in Ivy Exec on September 30, 2021.

Unlike CEOs and CFOs, not every company has a Chief Marketing Officer, and not every CMO has the same responsibilities, span of control, decision rights, and position in the reporting structure. Therefore, should you be offered a CMO position, it is important to understand your expected role at the company and negotiate a CMO employment agreement that will put you in the best contractual position to perform that role in the company and receive compensation and benefits commensurate with the services you are expected to provide.

The Chief Marketing Officer Role

Chief Marketing Officers are responsible for overseeing a company’s overall promotion, branding, digital presence, advertising and sales strategy, as well as coordinating marketing efforts with the company’s product development, financial position and goals.

CMO responsibilities and duties vary depending upon the organization, customers, products and services but often include:

  • Market research and analysis to better understand customer tastes and needs, identify likely customers and development of pricing strategy to induce sales
  • Determine what type of media to best reach your target audience
  • Digital marketing plan with such channels as Facebook, Twitter, Google, proper SEO, email, social media and development of your company website
  • Plan and execute for advertising campaigns with giveaways or contests to bring attention to and create interest in one of the organization’s products or services

Because these tasks can vary so widely, you want to be clear on the expectations and responsibilities you undertake in this role.

Delineate CMO Responsibilities and Authority

Your CMO agreement should describe in detail your duties, responsibilities, authority and reporting so that if there is a change in CEO or the Board, your role is established and remains clear. If the company later tries to reduce or change your role to something you did not bargain for coming in, proper terms in your CMO contract may allow you to trigger termination for good reason and your severance rights.

Even if you have an excellent employment relationship with the CEO and a strong champion on the Board, circumstances may change. If they do, a good CMO employment contract will protect your interests. 

Executive with CMO job offer

Include Key Terms on Which You Rely to Accept the Job

Your CMO employment contract should also include representations made by the employer that were significant reasons for your decision to accept the job.

Executive contracts typically have a “merger” clause which says all prior or contemporaneous oral or written agreements or assurances are merged into the agreement. Why is it necessary?

When making the CMO job offer, the CEO or your champion may have made certain representations about your role, the status of the company, or things that are expected to occur, and you rely on those representations in accepting the job offer, but those terms have not been included in your contract. Later, based on the merger clause, the company can argue that it has no obligation to you for such representations made to you. Therefore, you should ensure that all the key terms on which you rely to take this job offer are included in your contract.

Negotiating Your CMO Compensation Package

Your CMO compensation package should include a sign on bonus, employee equity and severance pay. The award of equity and bonuses may be guaranteed or based on performance. Regardless, the terms should be carefully delineated in the contract. In addition, you should negotiate with the Board for a bonus structure geared toward the goals timely set for you on an annual basis.

Equity compensation is frequently an important part of a C-suite executive’s compensation package. There are various forms of equity compensation, from ISOs and non-qualified stock options, to restricted stock and RSUs or profits or capital interests in LLCs. As CMO, equity vesting and levels are often tied to sales results. Your compensation should take advantage of these alternatives to achieve the best tax advantage.

For more information about executive compensation, please consult my earlier articles in CEOWorld on executive compensation packages and Bonus Structure.

Severance Terms to Protect Your Interests

Your CMO employment agreement should contain severance terms that address the situations where you are terminated without cause by the company or when you terminate the contract for good reason because the company breached contract terms, such as failure to honor obligations that you relied on taking the position, as mentioned earlier in this article.

The terms that should be provided if your severance rights arise should include substantial severance pay (e.g. 6 months or more of your base salary), and items such as a prorated bonus, added vesting or acceleration of equity, a release from any pay-back obligations, benefits continuation, outplacement assistance and at times relief from non-compete terms.

Such reasonable severance terms are an important back stop to assure you coming in that the company will either honor its commitments to you or make you whole if it is unable or chooses not to fulfill those commitments. Should the company and the Board decide to make those changes and as a result changes your deal, there should be a cost, and that cost is to make you whole.  With the right severance terms in your CMO contract, the Board will need to take that cost into account if it does choose to terminate you without cause or take the same action by means of constructive termination.

Success in the CMO role often depends on forces beyond your control (CEO, Board, other personnel, product performance, and market conditions, for example).  Before taking the job offer, you should have a CMO employment agreement that clearly delineates your role, your compensation, severance and other terms of employment. It is wise to seek the counsel of an experienced CMO employment agreement attorney to help you navigate the negotiations and protect your interests and career.