Roger Ailes, the former Chairman and CEO of Fox News Channel and Fox Business Network resigned in the wake of the lawsuit filed by Gretchen Carlson and allegations from other Fox employees. The allegations, while unproven, are ugly. Yet many news outlets have reported that he received a $40 million severance from Fox. This begs the question – why would Fox pay this guy $40 million to quit?
Here are our best guesses…
1. It may be required by Ailes’s employment agreement.
Many high level executives like Mr. Ailes have employment agreements which contain specific provisions for severance.
It is possible that such an agreement would have an “out” if the employee engages in gross misconduct or is convicted of a felony he will not receive severance, but, again, the allegations against Mr. Ailes have not been proven.
In light of that, Fox may be contractually required to pay Ailes a severance.
2. It is a fair compromise.
There is a saying that goes “the right settlement” is one that makes both sides equally unhappy. And it is easy to see why paying out $40 million would make Fox unhappy. But consider the fact that Ailes is reported to have earned approximately $20 million per year. $40 million is a lot of money, but it is only two years’ worth of his salary.
3. It keeps Ailes on Fox’s side.
Most severance agreements contain a “cooperation clause.” A “cooperation clause” requires a departing employee to cooperate in the event that the company gets sued and that employee has potentially useful information.
This is very important for high-level employees like Ailes. He is the person most knowledgeable about scores of things at Fox News, and his continued cooperation with the company is very valuable.
Similarly, if he is not required to cooperate, Ailes suddenly becomes a dangerous, and potentially very costly, wildcard. Big companies hate wildcards.
4. It keeps Ailes quiet.
Most severance agreements contain a “confidentiality clause.” A “confidentiality clause” typically keeps two categories of information confidential: First, a confidentiality clause likely requires the departing employee to keep the terms of his/her severance confidential. Due to the high-profile nature of Ailes’s departure, that consideration has gone out the window.
The second category of confidential information often covered by a “confidentiality clause” is more generally aimed at curtailing an employee’s ability to discuss his/her employment at all. These sorts of clauses contain exceptions which would allow the employee to testify truthfully, but otherwise considerably curtail what he or she can say about his or her employment.
By paying Mr. Ailes a severance, Fox has essentially, paid for his silence. Mr. Ailes has been in charge of Fox News for 20 years. He knows where all the skeletons are buried and a media war against Mr. Ailes would cause damage for all involved.