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This is a pretty interesting pictorial summary of how golden parachutes rewarded some of the top executives during the financial crisis.
"When high-ranking executives are fired from a company, for whatever reason, they don’t go to the back of the unemployment line. Instead, they typically receive compensation in the form of the “golden parachute.” Golden parachutes can include severance pay, cash bonuses, stock options or other benefits. In the case of the financial crisis and the ensuing bank failures, if it seems like these executives are being rewarded for poor performance, you may be right. Here’s a look at what some bankers made on their way down.
" http://www.mint.com/blog/finance-core/golden-parachutes-how-the-bankers-went-down/
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A few posts back I argued that in many cases CEOs are not overcompensated. These golden parachutes are the exception. I have no problem with severance packages but if you have steered the company on a steep downward trajectory you shouldn't be payed to walk out the door. It seems not only counter intuitive but it breaks down appropriate executive incentive structures.
ReplyDeleteI remember reading about how Robert Willumstad refused his $22 million severance package since other AIG stakeholders lost signifcant amounts of money. Its good to know some Wallstreet executives still act with a conscience.
ReplyDeleteTo play the devils advocate...I feel that the majority of these articles that we have been reading assume that all executives are given expansive rewards during company failures and that they are not personally losing anything when their companies take a downturn. However, some of my friends in high school had parents who were K-Mart execs and they lost all of their college funds when the company went under. There are definitely some personal ramifications for company failure...it is not all rainbows and daisies.
ReplyDeleteI find it pretty amusing to see that Alan Fishman left with 19 million after only working 17 days. That is not a bad gig at all. I understand that these execs lose a lot of their wealth in the collapse but they still leave with a lot of money even though it is small relative to their previous wealth, which I don't agree with. I agree with Tommy on this one.
ReplyDeleteI'm with Tommy as well. I feel that there should be some kind of protection for these companies so that they can get rid of these guys on the cheap after they screwed up so bad. Doesn't seem to make any sense that a guy should be given $100 million to leave after making the company go more or less out of business.
ReplyDeleteI agree that there should be some kind of safety measure regarding firing CEO's in companies who've gotten government funding. This reminded me of Home Depot's CEO a few years ago. He was fired and given a $210 million dollar severance package. The company fired him because they "didn't agree with his managment style." He was later hired as Chrysler's Chairman of the Board and began the process of rebuilding the company. When it was obvious the company needed further loans of $800 million the government offered to step up. Nardelli (the ceo) refused the government loans because it would cap the amount of money execs could make. Instead the company filed for bankruptcy and he was later replaced. Why do these guys always get a second chance when they strike out big the first time and cost their old company hundreds of millions of dollars?
ReplyDeleteIt is hard to say if every CEO was rewarded for poor performance of if the company was simply looking to clean house and move one without taking on any lawsuits. I don't agree with the amount of money these exec's were receiving despite either a short tenure or being a bad leader however who truly knows the full story behind each individual case. I agree with Ryan in that I too don't understand how second chances are granted to failures of such extremes.
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