Monday, August 9, 2010

Pet Peeves: Golden Parachutes = Perverse Incentives

The dismissal of HP CEO, Mark Hurd, after the market closed on Friday for a code of conduct violation brings up the topic of one of my favorite pet peeves: golden parachutes for executives.  I'm not going to delve into the circumstances that lead to his firing by the board.  I'll leave that to the news media.  However, as a shareholder of HP I'm pissed off that Hurd is rumored to be walking out the door with a rumored $10M in cash and $40M in stock all for violating company rules.  If any employee below the top executive ranks had committed this offense they would be shown the door with no severance package or golden parachute.  CEOs should be treated the same way.  Code of conduct violations should not be rewarded in this fashion, nor should being fired for poor performance.  If it isn't already clear, I am against golden parachutes period.  These executives are already compensated quite handsomely for the duties they perform.  Golden parachutes only hurt the stockholders of the company and the moral of the remaining employees while unduly rewarding individuals who are being shown the door.  I hope boardrooms will sober up and put an end to this distasteful practice.  If the job is not attractive enough on its own merits then it is time to move on to the next candidate, not put these golden parachutes in place that reward poor performance or ethical lapses.


  1. I couldn't agree with you more. Hurd makes me sick, and I don't get why he can walk away richer than ever. I am sure that contract employee did not get a big pile of cash when she left.

  2. I think Hurd gave the contract employee a portion of his cash as a settlement, but I don't know the details.

    At the company I just retired from we gave one of our executive dunces a golden parachute of about $25M because he couldn't cut the mustard. To me these guys should be treated like any other employee who performs poorly or violates company ethics.