The corporate landscape abounds with legal disputes between employers and Directors over issues of unfair dismissal and termination of contract. These often result in exposures running into billions of Naira. The unfortunate reality is that no company is immune from this issue. Any company that is yet to adopt a Severance Policy for its Directors is a potential casualty.

Every organization should adopt a Severance Pay Policy to save itself a lot of bad publicity, unnecessary cost, distraction to core business and bad blood with departing Directors. Severance can also enhance a company’s ability to attract, retain and motivate talents in the business, as prospective Directors can willingly take up employment, without fear of how they would be treated in the future.

Based on a Severance and Change-in-Control Plans survey conducted by the WorldatWork in 2014, about 80% of the participating companies had well-documented severance polices for their employees, including Directors.

However, majority of Nigerian companies are yet to embrace Severance Policy, due to reasons such as ignorance, misconception, complacency, lack of buy-in by the Shareholders or the Boards, etc. In some instances, companies are just waiting for an incident to happen to heed the wake-up call.

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