I was reading the Wall Street Journal one morning about the three CEO’s of the Automotive big three, Chrysler, General Motors, and Ford trying to get a rescue package(bailout) from the government to prevent the companies from going into bankruptcy.
As part of the package Congress requested details how the CEO’s would use the money. Two of the three mentioned they would take a salary of $1 each if the bailout was passed.
Sounds like a good deal to be able live off a dollar year. Of course, these three all have millions of dollars in the bank to cushion the loss of one year’s salary.
How does this occur? Without rehashing the past history of excessive executive compensation where even if the companies had poor results and the CEO was ultimately replaced with a large severance package after I read Jack Welch’s book “Winning” my view changed.
Normally when a position such as CEO becomes available, similar to any other job where are the most qualified applicants? In transition between positions? Certainly when times are tough executives may be available for hire, however, usually they are currently employed. Furthermore by the time someone is screening to be CEO they are already at the Vice President, EVP or C-suite level. They are like in good position with good companies with strong compensation packages.
Most times the reason a company is looking for a new Chief Executive is because of some problem with the business/results. Who would want to take on are rebuilding project which could potentially fail if they are in a stable position?
Therefore, the idea is to sweeten the pot so that taking the position is a no lose situation for the prospective CEO. This includes exit clauses that if the CEO fails. Most high caliber executive have risen to the top by succeeding not failing, however, when measured in relation to the reward most people received for losing their job the exit package it still seems like a great deal.
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