The executive career trap nobody talks about
Howard Levitt: As executives ascend the corporate ladder, they gradually lose control over the factors that determine their future
Most executives spend decades accumulating power.
Yet the higher they rise, the less control they may have over their own careers.
That proposition sounds absurd.
After all, senior executives possess authority, influence, resources and compensation levels unimaginable to most employees. They shape strategy. They hire and fire. They negotiate acquisitions. They likely report to boards rather than managers.
From the outside, they appear to have reached the summit of corporate autonomy.
In reality, many discover the opposite.
As executives ascend the corporate ladder, they gradually lose control over the factors that determine their future.
A sales manager can increase sales.
A division head can improve operations.
A vice-president can grow revenue.
The connection between effort and outcome remains relatively direct.
But, for chief executives and other senior leaders, that relationship becomes increasingly tenuous.
The most significant career events often arise from forces beyond their control.
A merger. An activist investor. A private equity acquisition. A change in board leadership. A shift in corporate strategy. A succession initiative. A new controlling shareholder.
A disappointing quarter that has little to do with management performance.
Or simply a board deciding that the next phase of the business requires a different type of leader.
Many executive departures occur not because the executive failed but because circumstances changed.
This reality is poorly understood outside of boardrooms.
The public narrative usually demands a simple explanation. Someone must have underperformed. Someone must have made a mistake. Someone must be responsible. But the truth is often more complicated.
Some of the most successful executives I have represented lost their positions while their organizations were thriving. They were invariably perplexed. Many felt betrayed.
Revenue was increasing. Profitability was strong. Investors were satisfied.
Yet the executive was ousted nonetheless. Why?
Because boards are not paid to evaluate the past. They are paid to anticipate the future.
The qualities that make an executive ideal for one stage of a company's development may render them less suitable for the next.
The founder may not be the ideal institutional leader.
The turnaround specialist may not be the ideal steward.
The entrepreneur may not be the ideal custodian of a mature enterprise.
In each case, the executive may have succeeded brilliantly, but the board concluded that someone else is better suited to what comes next.
There is another reality that many executives find even more uncomfortable: success itself can create vulnerability.
As compensation rises, scrutiny follows.
The executive who creates extraordinary value often accumulates extraordinary compensation.
Salaries increase. Bonuses rise. Restricted share units accumulate. Stock options vest. Deferred compensation plans grow. Retention incentives multiply.
Eventually, a discussion begins that has little to do with performance. It has everything to do with economics.
The question becomes not whether the executive is doing an excellent job but whether the organization wishes to continue paying for it.
In an era of cost pressure, activist investors, private equity ownership and artificial intelligence, I see that discussion with increasing frequency.
Senior leadership positions are no longer viewed solely as achievements but as investments.
Investments are evaluated. Sometimes they are replaced.
What makes this dynamic particularly dangerous is that many executives devote enormous effort to maximizing compensation and comparatively little effort to protecting it or appreciating the vulnerability that comes with it.
This is where employment law enters the discussion.
Most executives understand the value of negotiating an additional bonus percentage.
Far fewer understand the significance of the provisions governing their departure and the fate of their various entitlements.
Yet it is often those provisions that ultimately determine whether an executive retains or forfeits a substantial portion of their accumulated wealth.
The treatment of stock options. Restricted share units. Performance share units. Deferred compensation. Retention bonuses. Change-of-control protections. Carried interest. Termination provisions. Constructive dismissal rights. Restrictive covenants.
The language governing these clauses can affect outcomes measured not in weeks or months of compensation, but in years.
Ironically, many executives first seek advice regarding these matters only after they have received a call from the CEO or chair of the board requesting a meeting.
By then, their leverage has diminished substantially.
The most sophisticated executives approach the issue differently.
They understand that the most important employment advice is rarely obtained during a departure. It is obtained years beforehand, while they still possess their maximum bargaining power.
Smart execs prepare while they still have options; while amendments can still be negotiated; when they are still viewed as the "next best thing" who will turn the company around.
The greatest risk facing senior executives is not that their careers will end, as they inevitably do.
The greater risk is discovering too late that they never truly understood the rules governing that ending.
And in corporate life, endings usually prove far more consequential than beginnings.
Howard Levitt is senior partner of Levitt LLP, employment and labour lawyers with offices in Ontario, Alberta and British Columbia. He practises employment law in all provinces and is the author of six books, including the Law of Dismissal in Canada.