Because the people that set compensation is the board of directors, and they are composed of other executives. They want to set the precedent for themselves.
this post was submitted on 26 Jun 2023
16 points (100.0% liked)
No Stupid Questions
35671 readers
1341 users here now
No such thing. Ask away!
!nostupidquestions is a community dedicated to being helpful and answering each others' questions on various topics.
The rules for posting and commenting, besides the rules defined here for lemmy.world, are as follows:
Rules (interactive)
Rule 1- All posts must be legitimate questions. All post titles must include a question.
All posts must be legitimate questions, and all post titles must include a question. Questions that are joke or trolling questions, memes, song lyrics as title, etc. are not allowed here. See Rule 6 for all exceptions.
Rule 2- Your question subject cannot be illegal or NSFW material.
Your question subject cannot be illegal or NSFW material. You will be warned first, banned second.
Rule 3- Do not seek mental, medical and professional help here.
Do not seek mental, medical and professional help here. Breaking this rule will not get you or your post removed, but it will put you at risk, and possibly in danger.
Rule 4- No self promotion or upvote-farming of any kind.
That's it.
Rule 5- No baiting or sealioning or promoting an agenda.
Questions which, instead of being of an innocuous nature, are specifically intended (based on reports and in the opinion of our crack moderation team) to bait users into ideological wars on charged political topics will be removed and the authors warned - or banned - depending on severity.
Rule 6- Regarding META posts and joke questions.
Provided it is about the community itself, you may post non-question posts using the [META] tag on your post title.
On fridays, you are allowed to post meme and troll questions, on the condition that it's in text format only, and conforms with our other rules. These posts MUST include the [NSQ Friday] tag in their title.
If you post a serious question on friday and are looking only for legitimate answers, then please include the [Serious] tag on your post. Irrelevant replies will then be removed by moderators.
Rule 7- You can't intentionally annoy, mock, or harass other members.
If you intentionally annoy, mock, harass, or discriminate against any individual member, you will be removed.
Likewise, if you are a member, sympathiser or a resemblant of a movement that is known to largely hate, mock, discriminate against, and/or want to take lives of a group of people, and you were provably vocal about your hate, then you will be banned on sight.
Rule 8- All comments should try to stay relevant to their parent content.
Rule 9- Reposts from other platforms are not allowed.
Let everyone have their own content.
Rule 10- Majority of bots aren't allowed to participate here.
Credits
Our breathtaking icon was bestowed upon us by @Cevilia!
The greatest banner of all time: by @TheOneWithTheHair!
founded 1 year ago
MODERATORS
Also, they are all generally good friends, and want to make sure they keep the wealth "where it belongs"
Correct, also execs have strong bargaining power and entire industry of advisors to advocate for their comp.
This is opposed to wage slaves who are atomized and forced to negotiate for themselves while most industries collude to fix their wage. Many industries share their salary data to third party aggregator who will in turn provide reports that enable companies to fix wages for specific professions/industries. This is illegal but as you might no, government does enforce rules against "legal people" only organics who of "lower quality"
Not always, but often, making unpopular changes is precisely what the executive is being paid to do. Their job is to implement these changes, make sure that they are the one everyone gets upset with, and then take that anger with them when they leave.
To make them go away before doing more damage although their contract is still valid for some years. Same with a messie as tenant, you essentially bribe them to go before they damage the flat even more.
Not only that, but that parachute comes with... well.... strings attached. (Sorry.)
Most CEOs have a high-level understanding of a companies long-term strategic plan, which would be very valuable to competitors. That payout is probably tied to an iron-clad NDA and non-compete clause. While non-compete clauses get a lot of bad press when peons are forced to sign them, for executives they make total sense, especially when directly tied to a payout, which can be clawed back if there is chicanery.
If an executive is bad enough, paying them to not work anywhere for a few years may be less risky than firing themand risking them blabbing to th3 competition.
Essentially, there aren't a lot of candidates for roles like "CEO" at really large companies, so they want to attract the best candidate from a limited pool. Those people get to ask for whatever crazy thing they want if the board really wants them, and golden parachutes aren't illegal, so why not?
Oh, there are plenty of candidates, just not ones they will consider. They only take rich people from the right background.
There is another aspect, sometimes a CEO is brought on in a knowingly temporary situation. Sometimes a company needs to make an "unpopular" decision, like massive layoffs or restructuring. Or they just need a CEO to come in and stir the pot. They'll bring the CEO in, they'll do their thing, and then once the deed is done, they will "decide it's best to part ways" in some form.
This sort of CEO position usually is a one and done for that person making them a less desirable candidate for employment in the future, so they get a nice golden parachute to compensate. Basically, they get paid to be the "bad guy" and are essentially selling themselves as a scapegoat for the company.
Moral hazard, you say
Are you saying that these CEOs have it in their contracts that they get a ridiculous amount of money if they fuck up enough to get fired? Doesn't that incentivize them to be reckless?
No candidate for those jobs ever believes he will fuck up, nor that disastrous results are their direct responsibility. They always believe that the only reasons they'd be fired are political infighting or an investor/BoD revolt. Therefore, they want golden parachute clauses to protect them from such completely unjustified threats and criticism.
They're usually just separation clauses - i.e. whenever Joe Blow leaves his CEO position, he gets $X million. Like a lump-sum pension, which is more money that they don't have to call salary.
Are they short on the stock as well?
Everybody in the thread so far has a pretty bitter take, and I agree that golden parachutes are a joke. But I want to offer a more neutral explanation:
Basically, for an executive at a near-CEO level, taking on a position at a new company involves a lot of risk. Companies want to hire a top executive who's willing to take a career risk without having to consider their own bottom line. A golden parachute removes personal risk.
Now, it might seem like this runs contrary to the company's own interests, but they exist to attract CEOs and other top executives. They're meant to make an offer more attractive, and any offer that doesn't include it will be less competitive.
Another similar question: why has executive pay skyrocketed when it's exactly opposing to (most) companies best interests? Also, you could merely hire a qualified candidate from within the company who is already familiar with how things work and pay them still six figures, but not millions or billions. It seems kind of insane that one person is "worth" that much to a board.
When board is trying to corruption since guy is no good... Outside guy of their picking will do their bidding though
Because there are also CEOs and similar executives that do NOT fuck up and make billions for their companies. Big risk, but big reward.
Some would argue the workers make the companies all their money...
Usually because it was the result of part of the contract when they took the job. "Golden parachute if we ever fire you" is a reward for joining the company, it isn't decided when they are fired.
Make clawback provisions
The people affected the most are shareholders and employees they are held hostage to a board that many times doesnt even hold investments in the company!
Because the Rich are gonna Rich?
U.S. law allows the board of directors the control of payroll. They view themselves as superior to the servants tasked with actually accomplishing the business at hand. Imagine having to work for a living when there is golf to play, yachts to sail, and mansions to be bought. These executives set themselves up for success even in failure.
Kurt Vonnegut: "America is the wealthiest nation on Earth, but its people are mainly poor, and poor Americans are urged to hate themselves." The converse is also true in that Americans are trained to worship the rich, and to think they deserve all the help they can get, up to, and including, socialism for the wealthy, and rugged capitalism for the rest of us. This is reflected in corporate philosophy.
It's bad in the U.S., but it's far worse in China. There is some crazy corruption and greed.
In many cases those positions are terminal i.e. you fuck up company X and you are either never working again, or it will take you years to find a comparable position. The golden parachute is there to lower the risk for candidates when you offer the job. Is it abused? Of course it is, essentially becoming risk pay for people who aren't taking any risks. Compare to the "poison pill" where any attempted takeover or removal of executives triggers a massive payout to them.