I assume top companies want risk takers at the helm. Such severance packages seem to wipe out the risk. I would think companies would not only want top performers, but those who would see it as a priviledge, a challenge to lead such a company.
2007-01-31 05:32:57 · 3 answers · asked by vr 3 in Business & Finance ➔ Corporations
What you're forgetting, is that top executives are few and far between. And their wages are only a small percentage of what they earn for the company.
They don't pay you £1m a year, if you just earn £1m a year for the company. They pay you £1m, if you earn closer to £1bn a year or more! In these terms, the wage is really negligible. You are paying to have proven, top executives, steering and managing your company.
Unfortunately, one of the incentives you have to offer them is a ridiculously high severance package. If you don't offer it, someone else will, and then they'll get all the executive's experience and know-how.
And to be honest, it's the executive's right to demand the severance package too! If you are so valuable to any company, and so good at what you do, that companies are willing to give you severance pay in the order of millions of £'s (even if you muck up!) and a huge salary because of what you can make them, why wouldn't you demand it?
As for those who are priviledged to work for a company - The office-boy would see it as a privilege to work for somewhere prestigious like Rolls Royce etc. But you don't care about them very much or want them running the company do you? Feeling priviledged to work for a company is nice in a worker, an added bonus maybe, but it doesn't transform them from office-monkey to highly-successful entrepreneur does it? It doesn't make them worth any more to the company. So they don't get the high wages.
2007-01-31 06:05:43 · answer #1 · answered by Adam L 5 · 0⤊ 0⤋
You've got some good answers. There is another important point. It may turn out that the executive just terminated becomes CEO of your major customer. It is always a bad idea to burn bridges in the upper echelons of business. So, while the board may desire to sack a non-performing CEO, they want him to go away as friendly as possible.
2007-01-31 11:35:17 · answer #2 · answered by Flyboy 6 · 1⤊ 0⤋
Golden Parachutes as a part of the compensation package are an incentive to find the most savvy person for the job.
2007-01-31 05:47:29 · answer #3 · answered by Amy V 4 · 1⤊ 0⤋