High severance pay for top managers
Name(s):
Golden parachute severance agreements
Nature
Managing directors and other top managers are often guaranteed from one half to one full year's salary at the conclusion of their contracts. This could be more than $1 million in addition to salary after only 2 or 3 years work. There is little evidence that a single manager adds this level of profitability to any company.
Incidence
In 1991, more than half of the biggest US companies had "golden parachute" severance agreements, an increase from 35% in 1987.
Claim
High severance pay for managers is just a way for fellow directors to pave the way for their own high severance pay. It buys the loyalty for a year of the manager while they are at another company thus assuring secrets from one company don't go to another along with the executive.
Counter-claim
High severance pay of a departing manager reassures managers staying with the company that they too will be treated well when they leave or retire.
Aggravated by
Type
(E) Emanations of other problems