Should Executives Be Entitled To Big Severance Packages?

Despite economic turmoil in many countries around the world, one small group of the population continues to get paid (and paid well): executives. Even in situations where executives are forced to part from their job, in most cases they walk away with a hefty severance package, sometimes worth hundreds of thousands (or millions) of dollars.

This begs the debate, should executives really be entitled to hefty severance packages? What about in situations where the executive works for a company whose employees only make minimum wage? Industry experts and everyday citizens have weighed in on the debate.

In a letter sent to the Grand Junction Daily Sentinel, one citizen offered an interesting point of view in support of big severance packages. “As I understand it, in modern times, a severance package is actually part of a pay and severance package. This is usually assembled sometime after a candidate has been offered an executive job.” The commenter added, “This practice is common all over the U.S. (Think Tebow, Cutler, Fiorina, Unfug, and many others), and probably all over the modern world. Why? The reason is this: Most executive jobs are ones in which the candidate is signing up for a high-risk job. These jobs may offer the big bucks, but the hiring agency is not about to endlessly underwrite an employee who does not meet performance expectations…”

But there’s big severance packages and then there’s out of this world severance packages. According to the Washington Post, when Yahoo COO Henrique de Castro left the company, he walked away with a severance package totaling $58 million, some of which was paid in restricted stock units. Does anyone really deserve that much money for being with a company less than two years?

That’s not the only Yahoo executive who has learned how to negotiate a good severance package. Current Yahoo CEO, Marissa Mayer, will be walking away with even more money should she end up being forced to leave the company. USA Today pointed out earlier this week that terminating Mayer would end up costing Yahoo $160 million.

Another business expert from the employee training company, CRM Learning, offered some insight without jumping to conclusions. “The main concern for any company should be treating all employees fairly and investing in their futures. If a company pays all of their employees a fair, livable wage, then a big severance package for executives becomes much less of an issue.”

Middle class executives often benefit from severance packages as well, during times when they’re facing an involuntary separation from their job. Most people would agree that severance packages for workers who have put in their time are not only reasonable, but expected.

Forbes Magazine even wrote an article in 2011 about how to negotiate an even better severance package. Their list included things such as consulting with a lawyer, pushing for insurance benefits, and other fringe benefits such as stocks and options, and simply coming out and asking for a bigger severance package.

As stories of Marissa Mayer’s possible termination continue to make headlines, it becomes abundantly clear that some executives have certainly mastered this art of negotiating when it comes to their layoff payoff.

To sum it up, the prevailing opinion is that the majority of the population is okay with executive severance packages as long they are within reason and as long as average employees are earning a livable wage and being treated fairly.

Should executives receive big severance packages
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[Image via Shutterstock]