Why senior exits matter: hidden risks and protecting your reputation

Written by Marianne McJannett

When a senior leader leaves an organisation, whether a former owner or a long-serving executive, the process rarely resembles a standard resignation.

Despite that, many organisations manage senior exits with far less rigour than they apply to hiring the same person, and that gap is where most of the problems start.

A junior employee's departure is usually contractual and straightforward. A senior one carries more weight, because there's often so much more to unpick: enhanced remuneration packages, share options, restrictive covenants, access to confidential information and personal client relationships built up over years. Board-level responsibility adds a further layer, as does the individual's public profile within their sector.

That combination means senior exits need specialist legal advice on both sides, earlier than most people assume.

A poorly managed senior departure can create issues that outlast the exit itself.

Litigation is the most obvious risk. Mishandled processes can lead to claims for unfair dismissal, discrimination, whistleblowing, breach of contract or bonus disputes. A properly negotiated settlement agreement gives both sides certainty, but only when it's drafted with genuine care rather than treated as a formality to sign on the way out. The content needs to be considered; this isn’t the time for an off-the-shelf agreement.

Reputational damage tends to follow close behind. Senior leaders usually have wide networks and high visibility within their sector, so a difficult exit rarely stays private for long. It can unsettle staff, worry clients, and dent confidence in the wider leadership team.

Then there's the loss of relationships the individual carried personally. Founders and long-serving executives are often why certain clients, suppliers or team members stayed loyal. An acrimonious exit can trigger client attrition, further departures and a loss of institutional knowledge that often costs more than the exit package itself.

Under section 203 of the Employment Rights Act 1996, a settlement agreement is only valid if it's in writing, relates to a specific complaint or set of proceedings, and the employee has received advice from a relevant independent adviser, named in the agreement on the terms and effect of what they're signing.

Those requirements exist because a settlement agreement waives an employee's right to bring a claim. The exiting employee needs to get good legal advice, which is in the company’s interest too. Contributions towards legal expenses are a huge factor, and companies should expect to pay more than the usual £500 + VAT for a more straightforward agreement.

The Employment Rights Act 2025 will insert a new section 202A into the 1996 Act, making it void for a settlement agreement to prevent a worker from disclosing harassment or discrimination, or how their employer responded to it, except in narrowly defined "excepted agreements" still being worked out through consultation. Anticipated to come into effect in 2027, it means confidentiality terms that currently sit in a standard settlement agreement won't necessarily hold in the future, worth factoring into current drafting.

One pattern I've seen repeatedly involves founders who sell their business and remain with the acquiring company, often in a consultancy or leadership capacity to support the transition period.

The arrangement usually starts well. The founder helps with integration and introduces key relationships. Over time, though, tensions can build, and the working relationship can alter. Decisions that used to sit with the founder now sit elsewhere; management styles diverge and strategic direction changes. None of this typically involves misconduct or underperformance. It's a mismatch between expectations that took time to surface.

These exits need particular care because the individual's professional identity is often closely tied to the business they built, making the departure harder to manage.

Early legal advice taken while positions are still flexible tends to produce a better outcome for both parties. It can resolve compensation, any bonus or share entitlement, the scope of restrictive covenants and the wording of any internal or external announcement, while there's still room to negotiate.

An HR team is typically the first to notice the signs of a senior relationship under strain. Flagging that early, and bringing in legal advice before positions become fixed, is what separates a manageable exit from a difficult one.

Keeping a clear, contemporaneous record as the relationship develops matters too. It's much easier to negotiate a settlement from documented fact than to reconstruct events from memory once the relationship has broken down.