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Taxpayers to Fund Multimillion-Dollar Golden Parachutes; WooHoo!
As Wall Street is handing out golden parachutes instead of arrest warrants, those who may not have heard of a golden parachute - but are by now rather familiar with the $700 billion bill for company bailouts - wonder what they are and why they can't have one.What Are Golden Parachutes?
In simplest terms, a golden parachute is the name of a contract signed between a company and a top level executive. Specified in this agreement is the kind of severance package the exec will be entitled to if the company chooses to terminate the employment relationship.
Most commonly discussed are bonus payments, stock transfers, and other guarantees. Golden parachutes oftentimes measure in tens of millions of dollars and associated fringe benefits.
Why Do Companies Promise Such High Severance Packets To Their Execs?
The theory behind the golden parachute is simple: woo the best and the brightest of the industry to take a chance on the company, while at the same time doing their level best to grow the firm, even when it turns out that the company is on its way out.
Those most likely to significantly gain from a golden parachute package proclaim that this agreement protects a company from being without executive personnel, helplessly floundering in the waves, should there be the first signs of trouble.
Obama Weighs In On Golden Parachutes
CBS News reports today that Barack Obama - in an effort to make some political hay from the current $700 billion bill - has weighed in on golden parachutes and criticizes John McCain's advisor Carly Fiorina, who cashed in on a $42 million agreement from Hewlett-Packard - after being fired.
Even though this is blatant politicking, Senator Obama is making a good point. As companies are literally being managed and run into the ground while leaving shareholders holding the bag, upper level executives receive severance packages that would have made Croesus blush.
USA Today reports that previous Washington Mutual CEO Kerry Killinger walked away with $44 million, while in 2007 Merrill Lynch CEO Stanley O'Neal parted ways with the company and took with him a golden parachute of $161 million.
Comments
Great article!
Great article that brings to light these sickeningly absurb facts. It's so unfair and then we're left paying for the mess. Boo hoo to their little severance pkgs while real families like Leslie's and others suffer. Those same execs should pay for the bail-out. Thanks for allowing my little rant!
Fantastic article Sylvia. You make many great points with your usual flair. I hope people also take the time to read Rich's comment because he also makes an astoundingly important observation.
Right now we would be glad to have a life preserver thrown to us! We are drowning quickly and the horizon is very far away. I am a stay at home mom and my husband is a Realtor. Everything that he has worked on for the last few months has fallen through because of the financial fiasco that we are experiencing. Our reserves are gone now due to basic daily living expenses. We don't even carry debt (except for the mortgage) because it is too risky having a commission only income. We are out of income and can't catch up any time soon because all of the immediate future transactions are at a standstill. It's pretty bad when hard working citizens face losing their homes and can't keep their utilities paid while others have golden parachutes entitling them to obscene financial reserves.
I love your style.
Great article. I did not truly understand how this continued to happen. How dirty the government is for letting this continue to happen. I am glad they voted the bailout down.
I agree with Jcorn superb!!
Excellent article. I am glad the bill failed. If it does come back, maybe it will be different.
Funny how the "best and the brightest" run the company into the ground about 4 times out of 10, and do only so-so another 4 times out of ten. It isn't about merit. It is about the new aristocracy.
Great easy-to-understand description Sylvia! Nicely done!
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