When signing employment or severance agreements, companies often insist on “non-disparagement” clauses in which executives promise not to badmouth their employers. I’m not sure why, but the number of times the word “non-disparagement” pops up in SEC filings has crept up steadily over the past few years, doubling between 2004 and 2007.

These “speak no evil” clauses don’t have any accepted form, so each firm comes up with its own version. For example, new agreements Merrill Lynch (MER) put in place last week for three senior executives (which got a lot of publicity because the firm yanked these folks’ cash bonuses and replaced them with “retention stock option grants”) include a straightforward pledge not to “disparage, portray in a negative light, or make any statement which would be harmful to, or lead to unfavorable publicity for” Merrill or its current and former officers and directors.

But H. J. Heinz (HNZ), in this Retirement and Consulting Agreement with outgoing EVP Jeffrey P. Berger, goes further, extracting from Berger a promise not to say things “which would cause or tend to cause humiliation or embarrassment” to officers, directors or employees. This seems pretty loosey-goosey, as people’s thresholds for embarrassment vary greatly. (In fact, as Britney Spears proves, some people have no capacity for embarrassment whatsoever.) The Heinz contract also specifically makes it a no-no to dish any dirt about the firm in “chat rooms.”

Then there’s a really oddball clause in the new contract between Lazard Group (LAZ) and Chairman/CEO Bruce Wasserstein, a document that bears the catchy title “Amended and Restated Agreement Relating to Retention and Noncompetition and Other Covenants.” Here, Wasserstein not only agrees that he won’t make disparaging statements about Lazard or its directors or executives, but he’s also supposed to “instruct his spouse, domestic partner, parents, and … their lineal descendants” not to indulge in any such trash talk. Good luck with that one, Bruce, and be thankful you’re not married to Bill Clinton.

This entry was posted Monday, February 4th, 2008 at 10:10 am written by Wendy Fried and is filed under Buried treasure, Legal woes with the following tags: 8Ks, employment contracts. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.