Amazon CEO Jeff Bezos resigns - How should a legally compliant CEO resignation be done?
by RA Dr. Christian Zeller
Jeff Bezos, the founder of e-commerce giant Amazon, has announced on the 2nd of February 2021 that he will be stepping down from his CEO role. The announcement has been made public together with the company's fourth-quarter earnings report and was followed by an email to Amazon employees in which Mr. Bezos explained the reasons behind his decisions to resign.
Mr. Bezos wrote in his email: "Being the CEO of Amazon is a deep responsibility, and it’s consuming. When you have a responsibility like that, it’s hard to put attention on anything else." He also added that he won't cut all ties with the company and he will stay involved as an executive chair of Amazon focusing on "new products and early initiatives".
This is what a resigning CEO should know
As German Experts in Non-compete agreements and in Corporate Law, we at ZELLER & SEYFERT Attorneys at Law Partnership mbB have explored the legal implications of a CEO resigning. Our highly qualified German Corporate Lawyer, Dr. Christian Zeller had the following to say about the questions on everyone's mind:
Is a resigning CEO subject to a non-compete agreement?
Such a post-contractual non-compete clause is usually agreed in the CEO's employment contract / service contract or as an addendum to this contract. During an agreed period of time, under German Corporate Law for up to two years, the CEO may not work for a competing entity or become self-employed in the business area of the previous company.
How much notice before his / her resignation should a CEO give?
The CEO's employment contract / service contract would technically be subject to the statutory regulations in Sec. 621 or Sec. 622 German Civil Code (BGB). In fact, however, 99 % of such service contracts would contain notice periods deviating from the statutory law. Therefore, the correct notice period would usually be defined in the individual employment contract / service contract.
What benefits could a CEO keep after resignation?
Although there is no statutory obligation under German law to provide a severance pay, due to his / her several legal options the CEO would typically have leverage to negotiate a severance package according to his / her needs: Besides a severance pay this severance package would in many cases include short term bonus (STI), long term bonus in the form of equity or share options (LTI) and add-ons like re-location costs, outplacement support, tax support, non-compete compensation and possibly even legal fees coverage.
Can a resigned CEO occupy another function within the company after quitting the CEO role?
Yes, in practice CEOs often switch functions and serve on the advisory board (Aufsichtsrat) of a company. Although this might lead to conflicts of interests in some cases the shareholders of most companies would prefer such a solution due to the former CEO’s deep understanding of the company’s core business.
It is currently unclear whether or not Mr. Bezos will be subject to any non-compete clause. As he is planning to remain within the Amazon organization, though, this might possibly not even become legally relevant. For other CEOs, however, who resign in order to start a new business or work in a role similar to the one they are leaving, it is crucial to explore all potential pitfalls such a resignation may bring under German law.
At ZELLER & SEYFERT your Business Litigation case related to German Business Law or Corporate Law will primarily be handled by German Attorney at Law Dr. Christian Hendrik Zeller. He will represent you with tenacity and dependability and provides courtroom representation for you and your business before all German Regional Courts and Appeal Courts.
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