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703. Re: Morning Metaverse Oct 30, 2013, 12:16 Wowbagger_TIP
 
Beamer wrote on Oct 30, 2013, 11:28:
Wowbagger_TIP wrote on Oct 30, 2013, 11:23:

Lol. Most shareholders have little power over consequences for a CEO. They may step down after a major fuckup, but they're still gonna get paid tens of millions on the way out.
Korea
Well, in theory that golden parachute serves two purposes:
1) To get them to be willing to take the job. CEO is an apex position, and a short lived one. Despite what you see from celeb CEOs, the average CEO tenure is something like 2 years. And it can be hard to go from being a CEO somewhere to anything anywhere - usually it's CEO then retirement, whether you want it or not. So that parachute is to help convince someone it's good to go from a VP job you can ride for a bit to a job where the clock ticks faster (in truth, VP jobs have a clicking clock, too. The new CEO wants his people. Someone younger is bringing in fresher ideas. Or you were in charge during bad years, which had nothing to do with you, and now that things turned around they want that stigma of older management gone)
2) It rewards risk. You don't want a CEO playing it safe and going for moderate growth afraid he'll fail and be ruined. You want a CEO willing to take chances. That golden parachute is his insurance in chase a risk doesn't pan out. If it pans out, the company gets huge growth. If it doesn't, the company has a bad few years and the CEO gets booted for one that hopefully can change things

Golden parachutes are infuriating and usually too large, but are inherently a good and necessary thing.

Oh look, I'm defending corporations and CEOs! I must be parroting the DNC!

That actually makes sense, and I get it that the incentives are needed. I just think that, like you said, they're often too large, and they often seem to have almost no strings attached, so it doesn't matter how spectacularly bad they perform. They're retiring rich regardless. Even if they've sent the company into a nosedive.
 
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"The whole problem with the world is that fools and fanatics are always so certain of themselves, but wiser people so full of doubts." -- Bertrand Russell (I think...)
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