CEO severance.
by Crystal, Jon
Severance compensation has moved too far away from its original
intent--first, to cover the vested "value" an executive gives
up in order to take a new job, and second, to provide protection through
compensation to an executive while he/she found a new job in the event
he/she were fired "without cause." The "firing" cost
normally covered two to three years of compensation, which provided a
cushion of time (protection) to the executive plus some penalty to the
board for firing a senior executive without a good reason. But the
amount of this compensation decreased over time as the risk to the
executive decreased. Severance compensation was never meant to enrich an
executive who performed poorly.
Jon Crystal
Houston, TX
COPYRIGHT 2008 Chief Executive
Publishing Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.
Copyright 2008, Gale Group. All rights
reserved. Gale Group is a Thomson Corporation Company.
NOTE: All illustrations and photos have been removed from this article.
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