Eli5: How do CEOs from failing companies bail out with golden parachutes? Where does the money come from?

Question

Eli5: How do CEOs from failing companies bail out with golden parachutes? Where does the money come from?

In: Economics

Answer 1

> How do CEOs from failing companies bail out with golden parachutes? Where does the money come from?

When you work for wages, you produce a certain amount of value, which can be measured in dollars. Let us denote the value you produce as ‘x’. A small amount of that value is returned to you as wages, ‘w’. There is also the price of raw materials etc., ‘r’. We can then say that Profit ‘P’ is equal to x – (r + w).

The money comes from ‘P’, which increases as the company reduces the amount of wages, ‘w’, since ‘r’ is more difficult to reduce.