Severance and change-in-control agreements provide for payments to executives and other individuals in the case of termination. If properly constructed, severance arrangements provide a valuable tool to help protect the interests of a company while providing a necessary element of the pay package for attracting talent from their existing positions, especially in turnaround situations. By providing severance in exchange for demanding noncompete, non-solicitation and non-disparagement restrictions against an executive, the Board can better protect the company. Change-in-control arrangements relate to payments made to executive departures triggered by a merger, acquisition or divestiture. The prevailing practice is for "double-trigger" change-in-control arrangements that activate upon a business change provided that the executive also loses his or her job. Change-in-control arrangements encourage senior executives to seek out and execute sale or merger opportunities that add to shareholder value while reducing the impact of losing their job. The Center On Executive Compensation believes that severance and change-in-control arrangements can play a constructive role in the recruitment and retention of key executives. However, they should be carefully structured to support the company’s business strategy and serve the best interest of the company and shareholders. Additionally, companies should fully explain and disclose their philosophy around the use of severance and the purpose of existing severance and change-in-control arrangements.