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The Mystery of the Golden Parachutes

The concept of the “golden parachute”—where a big-time executive is given a generous bonus upon being relieved of his duties—is a peculiar one.  A company hires a renowned CEO whose reputation and resume not only precede him, but require that they pay him a huge, multi-million dollar salary.

And of course, along with that mega-salary come some very envious perks:  a limo to and from work, stock options, a generous vacation allotment, use of the company jet, membership in a swanky country club, and free piano lessons.

Why so rich a package?  Simple answer: Because this guy is thought to be worth every penny of it.  Simple answer:  Because he’s acknowledged to be a “rainmaker,” a man who’s demonstrated that he’s capable of taking over a company in distress and turning it into a profitable entity, and of taking over a profitable company and turning it into a gold mine.  In other words, this guy is a can’t-miss, managerial genius.

Which is why it’s so bizarre that this fellow would feel compelled to negotiate the terms of his own departure, once he’s fired for incompetence.  Isn’t that a bit pessimistic?  Even more bizarre is why management would agree to those terms.  Why would the same management team that agreed to pay this guy an exorbitant salary for leading the company forward agree to an exorbitant reward for his failing to do so?

A man comes in and tells you he’s the Messiah, he recites the long list of his accomplishments, his victories, his awards, his prizes, and informs you that, because he’s so damned talented, you’re going to have to pay him millions of dollars a year just to keep him.  And then, after you agree, he proceeds to tell you that he’s going to need an additional $10 million as a going-away present after he fails, and you fire him.

One would think that any self-confident, self-respecting executive would, as a matter of personal pride, treat this endeavor as a win-lose opportunity.  After all, the company is already compensating you very generously, expecting you to succeed.  And if you do succeed—if you do as expected—they’ll surely compensate you even more generously.

But if you fail in your job, if you fail to do the one thing that they hired you to do, why on earth would you expect to be rewarded for it?  Why would you expect to be rewarded for failing?  Is that the American way?  Why not just slink away with the millions of dollars you’ve already made, and write the whole thing off as an unfortunate mistake?

Golden parachutes remind me of pre-nuptial agreements.  A man and woman fall in love.  They are so much in love, they can’t bear being out of each other’s sight.  They can’t abide the thought of not living with each other for the rest of their natural lives.  That’s how much in love they are.  They decide to get married.

Then, after settling on the church, the guest list, the wedding dress, the cake, and where to go on their honeymoon, they sit down and discuss how to divvy up the money once they get divorced.  Call me old-fashioned, but that doesn’t sound romantic.  And call me frugal, but golden parachutes don’t sound kosher.

DAVID MACARAY, an LA playwright and author (“It’s Never Been Easy:  Essays on Modern Labor”), was a former union rep.   He is a contributor to Hopeless: Barack Obama and the Politics of Illusion, published by AK Press. Hopeless is also available in a Kindle edition. He can be reached at dmacaray@earthlink.net

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