Eli5: How do CEOs from failing companies bail out with golden parachutes? Where does the money come from?
In: Economics
CEOs may sign on to a company with a guarantee that they’ll be compensated well even in the event of a company failure.
Think of it this way: you believe you’re very good at your job. You get a good and interesting job offer from Company A to have an important role, but that company is not doing so hot. You get another job offer from company B, and it’s doing great. Both companies will you pay you the same amount.
Company A is a huge risk to your career and finances. You could spend years taking a risk there and never see a compensation increase if you can’t turn the ship around.
Meanwhile, company B is on the up-and-up, you’re almost guaranteed that if you join, the company will continue to grow well and your career and personal brand will grow as well.
So, how does company A get you, a good CEO to join? They eliminate a large part of the risk by offering you a deal that says if the company doesn’t do well, you’ll still be paid well, because you took the _risk_ of joining (or sticking around).
Now, you’re much more likely to join company A.
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