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Legal implications of executive performance reviews

On Behalf of | Jun 17, 2024 | Executive Employment

Executive performance reviews help organizations make sure their executives meet important goals. These reviews are important for assessing how well executives lead and perform. However, if not handled carefully, they can lead to legal issues.

Discrimination disputes

Executives who receive negative reviews might take legal action if they feel discriminated against. An executive might claim that the review was unfair because of their age, gender, or race. For example, an executive could argue that they received a bad review because of their age, saying it was a form of age discrimination.

If an executive believes they received a poor review as punishment for whistleblowing or reporting unethical behavior, they might also take legal action. This could happen if an executive reports illegal or unethical activities and subsequently receives a bad review.

Performance-based contracts

Executives with performance-based contracts might argue that their review was not accurate. For example, an executive might say that the review was unfairly negative to withhold their bonus. This can cause disagreements and legal challenges over what the executive is owed.

Best practices for conducting reviews

To reduce legal risks, companies should follow best practices when conducting executive performance reviews.

  • Ensure fairness and consistency in the review process. This means treating all executives the same way during reviews.
  • Use clear, objective criteria for evaluations. This helps employers base reviews on facts, not opinions.
  • Document all parts of the review process and outcomes. Keeping records can help if there are any legal issues later.
  • Give executives a chance to discuss and respond to their reviews. This allows executives to share their side of the story.
  • Keep performance reviews and related documents confidential. This protects the privacy of executives and sensitive company information.

Avoiding common pitfalls in executive performance reviews

Executive performance reviews are important for company leadership and growth. By following best practices and avoiding common pitfalls, companies can conduct effective reviews with lower legal risk.