Divorce for CEOs Comes with Unique Complications

Divorce For CEOs can be Increasingly Complicated, With Effects on Both Spouses Facing Executive Divorce in New Jersey.

Running any business is time-consuming. But running a corporation with employees and shareholders is all-consuming, as a company’s performance depends on the decisions of a few. And when companies struggle, shareholders look to the CEO for answers. The CEO is the most powerful of the executives running for-profit companies. Though they typically earn high salaries for their day and night efforts, that dedication to their job and income can contribute to a messy divorce.

Unique Hurdles CEOs Face During Divorce in New Jersey

Tight Schedules

A CEO does not leave their job at the office. They spend their evenings entertaining business clients and associates, attending banquets and award ceremonies, and making speeches and reports in the business world. They typically travel frequently. A job that never sleeps can be hard on a marriage. The CEO’s spouse takes on the lion’s share of household duties, maybe even working on top of domestic chores and childrearing. Tensions are bound to erode a marriage when a family enjoys a wealthy lifestyle but not the company and attention of their spouse or parent.

Communication Issues

Besides time, communication may be a pitfall in a CEO’s marriage. When the job rubs off on the marriage, it could be unhealthy. CEOs are the bosses, and their words are final in business. But not so in marriage. Spouses require more than black-and-white answers based on the economic consequences of at-home challenges. And though working long hours justifies the big salary, it does little for marriage. A spouse may feel they are the hotel manager lodging a temporary guest.

Income Distribution Complications

CEOs earn half a million to over a million in annual salaries and often enjoy additional income as company benefits and incentives. A CEO gets bonuses, stocks, travel mileage, and stock options to motivate their profit-making decisions. They also get generous benefits, including health insurance and life insurance, retirement, pension, and deferred compensation. While generous perquisites incent a CEO to perform their best, they can be their downfall in a divorce.

How Might a Divorce Among CEOs Impact a Company?

Company image and performance are essential to most businesses. So, the business can suffer when the CEO has a life-changing event. Private and public life are interrelated for the CEO. For example, divorcing couples divide marital assets and debts. Thus, the CEO’s spouse is interested in bonuses, stock options, and retirement and pension benefits. A CEO may have to sell stocks in the business to equalize a property settlement. And for a publicly traded company, the CEO may have to report a sale of company stock to the SEC, which makes their divorce even more subject to scrutiny in the public eye.

The Two Sides of Selling Executive Stock Options in New Jersey Divorce

Worse yet, a CEO’s decision-making capability is tied to their stock ownership. The greater the number of company shares they own, the more voting power they have. A majority shareholder has more votes than a minority shareholder. A sale of a large block of shares often may affect how the company is run. Thus, when a CEO must sell shares to divide assets in a divorce, the sale may dilute their power and hamstring their ability to steer the company.

However, a sell-off of stock options due to a divorce may positively affect a publicly traded business. Those shares sold to pay off a spouse in divorce free up available shares in the market, which can lead to market managers buying up more shares that raise the corporation’s S&P 500 weight and increase the business value. The index-fund managers factor the equity price of the company’s freed shares into the available shares in the market and buy them when a large stock sale results from a divorce. Unfortunately, the divorce stock sale could also signal trouble for the corporation and spook shareholders into selling their company shares.

High-Value Divorces: The Challenges Faced by CEOs

High-net-worth divorces pose unique challenges in the process. A combined spousal income of a million or more is a high net-worth divorce. For these divorces, parties and their attorneys must consider the tax consequences of asset and debt division and alimony. Alimony figures must consider taxable income consequences to the recipient, and real estate transactions may trigger capital gains taxes when the property is not the couple’s primary residence. Tax ramifications may influence who gets what and how much in a divorce.

In addition, the more assets a couple has, the more complications arise. As mentioned, asset division that requires selling off company shares and the publicity of a divorce can risk a CEO’s job. Company policies in profit-sharing may also limit the transferability of specific stock portfolios. And the transferability of stocks depends on the vesting period, whether before or after the divorce. Vesting determines when stocks are owned and transferable. With more complex assets, the divorce property division may need outside help from forensic accountants who can evaluate assets, especially businesses and business interests. Real estate appraisers may be necessary, too. As such, the number of assets and complexity typically add years to a divorce.

The Correlation Between C-Suite Level Divorce and Job Performance

Moreover, the psychological factor of losing half of their accumulated wealth to a divorce may influence a CEO’s decisions for the company. They may have a more cautious approach toward risky ventures. In other words, a CEO with less financial stability is less inclined to take business risks. And this mindset is not helped by time-consuming divorce hearings and procedures that take the CEO away from the business. The psychological and emotional impact could also affect the business, as they lose focus, energy, productivity, concentration, and stability.

CEO Difficulties Meeting Child Custody Demands

One complicated issue for the CEO is child custody. A busy CEO with little time to attend their children’s school and extracurricular activities may find special challenges in a custody dispute. Judges look to each parent’s work schedules and contributions to determine who would best provide consistency and stability to a child. Although, the policy in family court is to ensure a child has a continuing relationship with both parents when that is best for the child.

The best interest of the child is the foremost priority in awarding custody. A CEO’s schedule may be incompatible with work-week overnight visits, so alternating weekends with a mid-week visit may be the CEO’s most feasible time with children. However, the less custodial time a parent has with their child, the more child support they pay the other parent. Child support defrays the cost of maintaining and educating children, so the more custodial time a parent has, the more expenses they have.

How Do Alimony and Child Support Requirements Impact CEOs and Other Executives in NJ?

In addition, CEOs whose spouses worked fewer hours to maintain the household and childrearing duties may be entitled to alimony. The amount of support a spouse receives is based on the need of the supported spouse and the ability of the supporting spouse to pay. The need is measured against the lifestyle the spouses maintained during the marriage. In other words, the CEO may pay high child support and alimony to keep the family in the approximate lifestyle they enjoyed as a family living together.

But that does not mean that one spouse gets a windfall. A spouse must prove their need for alimony by convincing evidence. A CEO’s attorney can question the supporting documents justifying necessities. And alimony amounts depend on the marital arrangement of the spouses. When both spouses work, the alimony may supplement the lesser-paid spouse’s income so they can enjoy the lifestyle of the marriage.

An Experienced New Jersey CEO Divorce Lawyer Can Help Executives and their Spouses with the Difficulties of C-Suite Level Divorce

Hiring an attorney is the wisest strategy to protect a CEO’s interests in a divorce. A family law attorney at Montanari Law Group can help craft confidential financial agreements that remain out of the public’s eye to shield them from public scrutiny. And since assets and debts do not have to be split evenly down the middle, our lawyers can help construct a marital settlement agreement that allows the CEO to keep stock or other company benefits in exchange for real estate, future bonuses, or other assets to minimize the disruption to their job duties and performance.

We can also coordinate the professionals necessary to obtain property valuations, anticipate tax consequences, and plan for future income. Knowing that a dragged-out divorce takes an inordinate toll on a CEO, our dedicated family lawyers can work diligently to expedite the divorce as much as possible. If you are a CEO contemplating divorce in Pompton Lakes, Wanaque, Little Falls, Ridgewood, Franklin Lakes, Montclair, Caldwell, New Milford, Millburn, Short Hills, and elsewhere in the surrounding Passaic County, Essex County, and Bergen County, New Jersey area, contact a CEO divorce attorney at (973) 233-4396 to protect your interests and discuss your rights and options in a free consultation.