Why senior execs are at greater risk of being dismissed for cause — even where none exists
Howard Levitt: At the executive level, cause is not just a legal standard. It is a financial tool. And when the numbers are large enough, that tool sometimes gets used
The more senior the executive, the easier for boards to fire them for cause — even where none exists
Senior executives tend to believe that "for cause" terminations are rare and obvious, reserved for fraud, dishonesty or clear misconduct.
Because that reality is useful to them.
At the executive level, cause is not just a legal standard. It is a financial tool. And when the numbers are large enough, that tool sometimes gets used.
Before an executive is removed, there is almost always a calculation.
Then the second question: is there a path to cause? Not necessarily a winning case. Just a credible one.
If the answer is yes, the strategy often changes immediately.
Because alleging cause does not only reduce liability; it can virtually eliminate it — at least as a starting position.
Executives imagine cause as something that emerges organically. But it is often artificially built.
Once the decision is made, past conduct is re-examined with a different objective. Emails are reviewed not for context, but for tone. Strategic disagreements are reframed as poor judgment. Missed targets — often driven by broader business conditions — are recast as personal failures.
Then comes the documentation.
Concerns that were never formalized suddenly appear in writing. Feedback becomes "warnings." Expectations are clarified after the fact. A file is assembled that did not exist when the events actually occurred.
The file is not fabricated. It is curated.
And it is designed to survive scrutiny long enough to create leverage.
Most executives still assume the battle will be fought on the merits.
It often is not.
The pressure point is elsewhere: time, cost and reputation.
A cause allegation immediately forces the executive into defensive posture. Compensation stops. Equity is frozen or forfeited. The burden shifts.
To challenge it means litigation — public, expensive and slow. It means internal communications disclosed, decisions dissected and judgment scrutinized in a forum that future employers, boards and investors can all observe.
Boards understand this calculus.
That is why cause is sometimes alleged even when the case is uncertain, and even though the company assumes its own risk of additional damages for the employee if the court decides that the cause was alleged in bad faith to pressure the employee into an improvident settlement.
The uncomfortable truth is that many cause cases are not built to be won in court. They are built to be settled.
And they are vulnerable in predictable ways.
Courts do not look kindly on after-the-fact documentation. They are skeptical of sudden performance concerns that were never raised contemporaneously. They question why serious misconduct, if it truly existed, was tolerated without consequence.
The more the narrative diverges from the lived reality of the employment relationship, the harder it becomes to sustain.
This is where sophisticated executives regain leverage — if they move quickly.
The instinct to "take a few days" or respond informally is a costly one.
By the time an executive reacts casually, the company's position is already documented, internally aligned and often communicated externally.
Effective responses do the opposite.
They force specificity immediately. What, precisely, is alleged? When was it raised? Where is it documented? Who addressed it at the time?
Vague assertions collapse under precise questioning.
And once they begin to collapse, the risk shifts.
A weak cause allegation is not neutral. It is dangerous — for the employer.
Wrongful dismissal damages at this level are substantial. Lost equity claims can dwarf salary. And bad-faith and reputational damages — where allegations are advanced recklessly or without foundation and the cost rises significantly — can change the dialectic altogether.
Then consider the audience.
Institutional investors, regulators and other boards pay attention to how senior executives are treated. A public, unsuccessful cause allegation raises questions — not just about the executive, but about governance, oversight and judgment.
When those risks surface, early and credibly, the leverage that began with the employer can be reversed.
When executives come to see us, our advice is simple. Do not argue. Instead, construct.
Rebuild the record in real time: performance history, board interactions, contemporaneous communications, business context. These expose the gap between what is now alleged and what was then accepted.
Then apply pressure selectively — enough to make the risk clear but not enough to make resolution impossible.
And understand the objective.
At this level, the goal is rarely vindication in a courtroom. It is converting a "for cause" narrative into a without-cause outcome — with compensation, equity and reputation intact.
That happens far more often than most executives realize.
The greatest error is not being terminated for cause. It is assuming the label is final. It is not. It is an opening position — one that is frequently aggressive, sometimes strategic and often reversible.
But only if it is challenged with equal strategic composure.
Boards rely on executives misunderstanding how cause and reputation management actually work.
They rely on the executive's hesitation, fear of reputational damage, and on their assumption that the narrative is fixed.
It isn't. At this level, employment disputes are not decided by what is alleged but by what can be sustained under pressure.
Executives who understand that — and act on it quickly — do not just defend cause allegations. They dismantle them.
Howard Levitt is senior partner of Levitt LLP, employment and labour lawyers with offices in Ontario, Alberta and British Columbia. He practices employment law in eight provinces and is the author of six books, including the Law of Dismissal in Canada.