Executive Sign-On Bonus and Buy-Out Awards in Gulf Hires

An executive sign-on bonus and a buy-out award are different payments that are often written into one clause. A buy-out replaces pay a senior hire gives up by leaving a previous employer. A sign-on bonus is a premium for joining. A Gulf remuneration committee that does not separate the two will pay more than it needs to and protect less than it should. The Investment Association's Principles of Remuneration 2025 put the standard for UK-listed companies plainly: compensation for forfeited awards on no more than a like-for-like basis, with the details and rationale disclosed. Gulf boards are not bound by that guidance, but it is a good test of a buy-out in any market. This piece is written for the remuneration committee and the hiring chair. It is not legal advice, and a board should take local counsel before it signs.

Executive sign-on bonus or buy-out award: two different payments

A senior hire who moves from one employer to another usually leaves value behind. Shares that have not yet vested. A deferred bonus that pays out next year. An annual bonus for a year that is nearly complete. These are real claims, and the new employer is often asked to make them good.

That is a buy-out. It has a defined size, which is whatever the executive can show was lost, and it has a natural shape, which is the shape of the thing replaced. If the lost award was shares vesting in three tranches, the replacement should follow the same dates.

A sign-on bonus is something else. It is a payment for joining that does not replace a specific loss. It may be a bridge for relocation costs, a reward for the executive's willingness to move, or a way to close a gap between the executive's expectation and the base the board is willing to pay. There is nothing wrong with a premium, provided the committee knows it is paying one. The risk is that the two are blended into a single "sign-on" figure, and nobody can say afterwards how much of it was compensation and how much was persuasion.

In JOH Partners' search work, sign-on and buy-out arrangements are more common in some sectors than others and are becoming more frequent, though they are still far from universal, as JOH set out in its Gulf executive reward report. Notice periods are lengthening for the most contested roles. Nothing in this piece adds a figure to that report. It is about how the payment is structured, not how large it is.

What the UK rules and investor guidance ask for

The UK sets the clearest published standard, and a Gulf committee can use it as a reference without being bound by it. The Investment Association's Principles of Remuneration 2025, published in October 2024, say that a newly appointed executive director may be compensated for forfeiting previous awards on no more than a like-for-like basis, and that shareholders expect the committee to disclose the details and rationale of the replacement awards.

The law adds a disclosure layer. Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008, in paragraph 29, requires a directors' remuneration policy to state the principles applied when pay is agreed for a new director, and the components considered. Compensation for awards forfeited at a previous employer is excluded from the cap on variable pay in the policy, but the statement of principles still applies. The UK Corporate Governance Code 2024, in Provision 36, asks for a total vesting and holding period of five years or more for share awards, and in Provision 40 that notice periods should be one year or less, including for directors recruited from outside.

The common thread is that a buy-out is permitted, but it must be explained. It should mirror what was lost, and the board should be able to say what that was. A committee that takes the standard seriously will ask for evidence before it agrees to a number.

Why Gulf hires arrive with different claims

The Gulf market has a feature that makes the discipline harder. Packages in the region have historically leaned on cash and allowances, with less equity than the United States or Western Europe. JOH's Gulf executive reward report restates the public evidence for that and the signs that the mix is moving at the listed and IPO-bound end. The consequence for a buy-out is an asymmetry.

An executive coming from a Gulf employer with a cash-heavy package usually forfeits less: perhaps a deferred cash payment or the unpaid part of a bonus. An executive coming from London, Singapore or a global group may forfeit a stack of unvested shares and performance awards, because that is how they were paid. The hire from the corridor arrives with a bigger claim. JOH's perspective on the UK-Gulf corridor looks at why British-trained executives are moving back into the region, and the buy-out is one of the places that move gets priced.

That asymmetry is not a reason to refuse. It is a reason to be clear about the rule the committee applies, because the first buy-out becomes the benchmark for the next ten.

A buy-out should replace what the executive gave up to join, and nothing more. Anything above that is a premium, and the board should call it one.

A composite: the group operating chief from a European listed company

The details are changed and combined from several situations. This is not any one client's story.

A Gulf industrial group recruits a group chief operating officer from a European listed manufacturer. The executive holds performance shares that vest in twelve, twenty-four and thirty-six months, and an annual bonus for a year that has nine months to run. The executive's advisers produce a spreadsheet that values the forfeited shares at their grant value and adds the bonus at target.

The committee, keen to close, agrees a single sign-on payment equal to the total, paid in cash in the first month. There is a clause asking for repayment if the executive leaves within two years. Nobody asks for the plan rules, the performance conditions or the leaver letter from the previous employer.

Eleven months later the executive receives a better offer from a competitor and resigns. The repayment clause turns out to be hard to use. Under the law of the place where the executive works, deductions from final pay are limited, and a claim in court against a departed executive is slow and uncertain. The committee later learns that the European company missed the performance targets on the first two tranches, so most of the shares the executive gave up would have lapsed in any case. The group paid cash, up front, for value that might never have existed, and has no practical way to get it back.

Pay later, do not recover later

The strongest protection in a buy-out is the structure of the payment. A recovery clause depends on someone going after money that has already been paid. A payment made in stages depends on nothing: if the executive leaves, the next stage is not paid.

The same logic applies in the Gulf. Under UAE Federal Decree-Law No. 33 of 2021, Article 25 allows deductions from a worker's wage only in listed cases, each with its own cap, and the total may not exceed 50 per cent. The text is on the UAE government portal. Whether a sign-on repayment counts as a deduction, or as a contractual claim, is a question for counsel, and the same question arises for the recovery clauses in JOH's perspective on malus and clawback in Gulf executive pay. A board that has not had it answered should not rely on recovery.

In practice, the committee should do three things. It should pay a buy-out in the form of what was lost: shares for shares where its own plan allows, or a deferred cash or phantom award where it has no equity plan. It should pay on the dates the old awards would have vested, so the executive's incentive to stay lines up with what they gave up. And it should make the old awards' performance conditions part of the new award, so that the executive does not receive value the old employer would never have paid.

Paying later is stronger than trying to recover later. A payment that arrives in stages, for as long as the executive stays, needs no clause to enforce.

The first test of a remuneration committee

A buy-out is the first real test of a new committee's discipline, and often of an old one's. The candidate is wanted. The chair has spent months on the search. The chief executive has said the hire is essential. The committee is asked to approve something it cannot fully check, quickly, and everyone in the room would prefer a yes.

The committee that passes the test asks for evidence: the plan rules, the grant letters, the vesting calendar and the previous employer's leaver terms. It asks the question the candidate's advisers would rather it did not: what would have vested, and when, on the previous employer's own numbers? It records the answer, and it records the rule it applied so the next case follows it. JOH's perspective on the remuneration committee sets out who sits on these committees and what they decide, and JOH's research on who sets executive pay in the Gulf looks at how far they use their discretion.

Candidates preparing to discuss a buy-out from their own side will find their questions covered in JOH's guide to negotiating an executive job offer. This piece is written for the committee and the hiring chair.

What the committee should ask for

Before approving a buy-out, a committee should have in front of it the documents that prove the loss: the plan rules and grant letters, the vesting dates and performance conditions, the leaver terms, and the previous employer's most recent statement of the executive's holdings. It should be able to separate three items in the offer: what replaces a loss, what is a premium, and what is base pay. When a package is priced, a one-off payment on joining should be held apart from annual pay, and how a one-off sign-on payment is held apart from annual pay when a full package is priced is set out plainly for committee members who have not worked with the method before.

The committee should also ask what the departure terms will be. JOH's perspective on executive severance in the Gulf covers the other end of the same decision, and a package that is generous on the way in and silent on the way out leaves the board exposed twice.

A board that wants a continuing view of how senior hires settle, how long they stay and how their pay compares with peers, and not a snapshot at the point of offer, can use platforms such as Board Pulse to follow the executive layer between review cycles. JOH's group holdings sector page sets out where the firm sees these hires most often. JOH's engagement placing a chief technology officer into a tier-one GCC universal bank shows how a senior international hire is scoped alongside the pay terms. Adam Malouf on cross-border leadership across Dubai, Australia and beyond is a useful listen for a committee thinking about what moving a senior leader across markets involves.

What the board is really deciding

Nobody forces a committee to match what a candidate gave up. It is a choice, made to win a hire the board wants. What the board controls is how the choice is drawn: whether the replacement is kept apart from the premium, whether the form and the dates match what was lost, and whether the money arrives in stages. Drawn that way, the hire costs what it should, and the money stays tied to the executive's time with the group.

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Key takeaways

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JOH Partners is an executive search and senior executive recruitment firm that advises chairs, remuneration committees and family groups on senior appointments across the GCC, the UK and Singapore. The full Gulf executive reward report is available to download for any committee pricing a hire. A chair with a live appointment in front of the committee can then engage a partner to talk through the buy-out before the offer goes out, and a board that wants to follow how its senior hires settle can request a Board Pulse demo.