Advisory Case on Systematizing Internal Rules for Executive Retirement Benefits

1. The Client's Situation

The client's internal standards for calculating and paying executive severance pay were ambiguous, and it requested the establishment of rules clarifying the severance payment standards in order to prevent the possibility of disputes when executives retire in the future. In particular, it needed unified standards regarding payment rates between the representative director and director-level executives, the method of calculating average wages, and the handling of reappointments.

After analyzing existing practices and similar industry cases, Your Legal Team organized the article structure and wording to reduce confusion in practice. It distinguished the payment rates of the representative director and other executives, while clarifying the average wage standard, the method of calculating the term of office, and the handling of reappointments, thereby securing consistency and predictability in calculating severance pay. In addition, it established a special consolation payment provision for executives who have rendered meritorious service to allow exceptional compensation, while requiring a board resolution as a condition to prevent abuse.

With Your Legal Team's assistance, the client was able to systematically organize the standards relating to executive severance pay, thereby preventing future internal confusion regarding severance payments and blocking the possibility of legal disputes in advance. Moreover, by newly establishing a special consolation payment provision in addition to severance pay, flexible compensation for executives who have rendered meritorious service became possible.