Governance-Led Restructuring of a U.S. Executive Agreement

Securing the long-term commitment of the President of a North American subsidiary — through a six-year executive agreement with clear governance mechanisms, performance-based incentives, and a durable long-term structure.
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    Overview

    Parent company

    Company type

    Owner-led international industrial group; agricultural and automation technology

    Ownership

    Privately held, owner-led

    International footprint

    Multiple continents

    Mandate focus

    Governance & compensation alignment; long-term retention of the U.S. President

    North American subsidiary

    Location

    United States

    Sector

    Manufacturing, assembly & distribution

    Structure

    Wholly owned U.S. subsidiary; independent operating unit with a high share of product content sourced from the group

    Growth stage

    Rapidly growing organization; increasing strategic importance to the group

    Mandate

    Contractual restructuring; executive agreement of the President, North America

    Outcome

    Six-year employment agreement; foundation for continued revenue and EBITDA growth
    Growth

    Growth Without a Governance Structure

    The North American subsidiary had developed strongly on an operational level and was becoming increasingly important to the group’s strategy. Revenue and profitability had grown significantly, new business areas had opened up, and the organization had established itself as a serious player in its segment.

    As the existing employment agreement approached its end, the long-serving President submitted a comprehensive, professionally prepared compensation proposal — with substantially expanded demands on base compensation, a bonus structure with minimum payments, long-term incentives, and contractual protections.

    For the shareholders, this raised a central strategic question: how do you secure the long-term commitment of a demonstrably high-performing executive — without compromising governance, profitability, and the company’s long-term flexibility?

    Structure, Not Level

    The Real Issue: Structure, Not Level

    The central issue was not the overall level of compensation — it was the long-term structure of the agreement and the governance risks attached to it.

    The proposal contained several elements with structural risk:

    • A proposed guaranteed bonus floor would have permanently converted variable pay into fixed cost — with no market precedent among comparable owner-led industrial companies.
    • A purely revenue-based bonus logic could have incentivized growth at the expense of profitability.
    • The benchmark data drew on structurally non-comparable, PE-shaped compensation environments.
    • Without a durable long-term contract structure, the parties faced recurring annual first-principles negotiations that would strain the shareholder–management relationship over time.
    Mandate Objective

    The TH Bender Mandate

    TH Bender was engaged as an independent board and governance advisor. The goal was not merely to negotiate a new compensation package, but to develop a durable executive-governance structure — through a structured process across four phases:

    • Phase 1: Independent analysis of the compensation proposal; market benchmarking (internal + external); governance risk analysis; development of a well-founded counter-position with three scenarios.
    • Phase 2: Development of the new compensation structure (STI/LTI); governance framework; durable long-term contract structure; bilingual contract documentation.
    • Phase 3: Direct negotiation leadership; coordination with legal counsel; finalization and signing of the employment agreement.
    • Phase 4 (optional): Governance structures for the North American organization; long-term board-advisory support.

    TH Bender acted as the interface between the shareholders, U.S. management, HR, and external legal counsel — taking on not only an advisory role but an actively facilitating and negotiation-leading one.

    Market Analysis

    The Market Analysis: PE vs. Owner-Led

    The benchmark analysis drew on an internal comparison database of roughly 300 relevant executive-compensation data points from the North American market, supplemented by current external market studies. Particular care went into distinguishing PE-shaped from owner-led compensation structures.

    The analysis produced five core findings:

    • Existing compensation was already in the upper market quartile — measured against the correct benchmark for non-PE-owned U.S. industrial companies of comparable size.
    • The executive’s benchmark sources came from PE-shaped environments. PE compensation follows a fundamentally different logic: lower base salaries are complemented by exit proceeds of significant magnitude — mechanisms that structurally do not exist in an owner-led company.
    • Guaranteed bonus-floor mechanisms create long-term governance risk and have no market precedent among comparable companies.
    • External cost factors (exchange rates, import tariffs) call for a redesign of the bonus formula — not an increase in fixed base pay.
    • An external replacement would be costly and carry significant risk to customer relationships and operational continuity. Long-term retention was clearly the more economically sensible path.
    Governance

    Building the Governance Framework

    Together with the shareholders, TH Bender developed a framework that reconciles U.S.-market executive expectations with the governance and ownership structures of an owner-led industrial group.

    Pay-for-performance vs. bonus stability: An EBITDA-based annual bonus ties variable pay directly to earnings power — with no revenue-driven distortions, no guaranteed floor, and no artificial cap. Variable pay is therefore triggered only when profitability is healthy.

    Long-term retention without equity: A cash LTI whose payout is tied to the achievement of defined EBITDA milestones over a multi-year measurement period creates economic alignment without corporate-law complexity — and without any equity participation.

    Durable contractual commitment: A multi-year fixed term with automatic renewal avoids recurring first-principles negotiations and creates long-term predictability for both sides.

    Bilingual documentation: All documents were prepared in both working languages — English and the shareholders’ native language — with explicit explanation of U.S. compensation norms for the ownership side.

    Negotiations

    The Negotiations

    The negotiations were actively led by TH Bender. Before the first direct contact, the ownership side arranged a personal introduction of TH Bender to the executive — a deliberate trust-building step signaling that the process was being run transparently.

    The negotiation strategy rested on three principles:

    • Acknowledge performance first — every conversation began with a sincere recognition of the executive’s entrepreneurial achievement before any counter-position was presented.
    • Method, not criticism — the benchmark correction was framed as a factual observation: “The comparison data come from a PE environment — that is a structural incompatibility, not a criticism of your analysis.”
    • Solve legitimate concerns at the source — on the FX and tariff argument, TH Bender agreed directly with the executive and demonstrated, using his own data, that the redesigned bonus formula would have produced a substantially higher bonus in a typical year.

    The conversations ran over several rounds. The executive accepted.

    The Outcome

    The Outcome: Six-Year Executive Agreement

    The parties agreed on a new six-year employment agreement — market-aligned, governance-compliant, and oriented toward continued growth.

    Term

    Six years; automatic renewal for two-year periods; 180 days’ notice

    Base compensation

    Redefined; market-aligned; effective retroactively to the start of the new term

    Annual bonus (STI)

    EBITDA-based annual bonus (fixed percentage of EBITDA); no guaranteed floor; no cap

    Long-term incentive

    Cash LTI; payout on achievement of defined EBITDA milestones within a multi-year measurement period; no equity participation

    Benefits

    Health insurance (incl. family), company car, vacation, disability, mobile, 401(k)

    Severance

    Market-standard U.S. severance on termination without cause; conditioned on a release of claims

    Non-compete

    12 months post-termination; limited to core segment and served customers

    Backdating / effectiveness

    New compensation effective retroactively to the start of the term; transition year cleanly delineated

    The EBITDA-based LTI milestone structure ties the executive’s long-term compensation interests directly to the shareholders’ growth objectives. With leadership stability, a clearly defined six-year horizon, and a professional governance structure, the organization enters its next growth phase — targeting a further doubling of revenue and EBITDA.

    What This Case Study Shows

    • Executive compensation is a governance issue. Pay models directly shape executive behavior and an organization’s strategic direction.
    • Market knowledge is decisive. Distinguishing PE-shaped from owner-led benchmarks can materially shift the relevant market comparison — and reframe the entire negotiation.
    • Solve legitimate concerns at the source. Redesigning the bonus formula serves both sides better than a compromise that merely preserves the structural problem.
    • Long-term retention comes from structure — not from higher pay alone. A multi-year fixed term, LTI structures, and defined milestones create predictability for both sides.
    • Trusted mediation is decisive. Complex executive negotiations require an advisor who is credible to both the ownership side and the U.S.-market executive.
    Client Perspective

    Client Perspective

    “TH Bender helped us analyze the situation objectively and develop a solution that reflects both the company’s interests and the long-term retention of our U.S. President. What we valued most was the combination of solid market data, governance expertise, and the ability to structure the conversations and guide them to a successful close.”

    — Shareholder representative, international industrial group

    Frequently Asked Questions Governance-Led Restructuring of a U.S. Executive Agreement

    Particularly at contract renewals, strong revenue growth, succession questions, or strategic change. When internal resources for a well-founded read of the U.S. market are lacking, an external analysis creates the necessary basis for a decision.

    The U.S. market relies far more heavily on performance-based incentive structures, retention mechanisms, and contractual protections. The decisive factor is correctly distinguishing PE-shaped from owner-led compensation models — confusing the two can materially distort the market comparison.

    A purely revenue-based bonus can incentivize growth at the expense of profitability. An EBITDA-based bonus instead couples variable pay directly to earnings power — so variable pay is created only when profitability is healthy.

    A multi-year fixed term with automatic renewal secures leadership continuity, avoids recurring annual first-principles negotiations, and creates long-term predictability for both sides — an often underestimated element of modern executive agreements.

    A neutral advisor creates market transparency, methodically secures the ownership side’s negotiating position, and reduces emotional tension. The ability to operate credibly with both the ownership side and a U.S.-market executive is often the decisive factor in reaching a constructive close.

    Start a Confidential Conversation

    Facing leadership, governance, or executive-retention challenges in your North American organization? A confidential conversation can help assess whether an independent compensation review, a governance analysis, or a structured redesign of an executive agreement makes sense.

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