Other outrageously planned retirement packages are coming to light. CBS Corporation (NYSE:CBS) CEO Les Moonves is currently set to receive $251.4 million if he hits the road. Discovery Communications Inc. (NASDAQ:DISCA)’s CEO David Zaslav could receive $224.7 million upon his departure.
Investors too often forget the meaning behind these after-the-fact rewards: Boards of directors are throwing millions of dollars of shareholder money at people who had made millions during their actual tenures anyway. There’s also simple economic psychology involved that corporate leaders would never apply to regular workers: Why work hard or even effectively if you’re guaranteed a gigantic payout if you leave or even get fired?
Jumping without a chute
Every once in a while, a chief executive will fly without a golden parachute or special payout, but it’s so rare it’s noteworthy.
Zynga Inc (NASDAQ:ZNGA) CEO and founder Mark Pincus’ demotion to chief product officer was one of this week’s biggest news headlines. Given the way most corporate policies are designed, such a move could have included a handsome reward.
It turns out he’s taking a title drop without a chute or special perk, but we don’t have to weep for his financial stability. Despite his token $1 salary, Pincus is not hurting for money to begin with; although his net worth was $2 billion several years ago and has dropped to $780 million, that’s still not chump change.
Meanwhile, given his 7.5% stake in Zynga Inc (NASDAQ:ZNGA), his financial interests are oddly aligned with Zynga Inc (NASDAQ:ZNGA) shareholders’ (although his whopping 61% voting control is not). Still, it’s in everyone’s best interest if newly appointed CEO Don Mattrick can get that company’s prospects back in the game.
In January, Rio Tinto plc (ADR) (NYSE:RIO) CEO Tom Albanese walked without a payout. That’s good news for the company’s shareholders, because U.K.-based Rio Tinto plc (ADR) (NYSE:RIO) had to write down $14 billion previous to his departure. Glance at a five-year chart and you’ll see Rio Tinto has been on a downward trajectory for years. Unfortunate acquisitions marked his tenure and sullied his reputation.
Albanese’s lack of cushion makes perfect common sense, but unfortunately, such situations remain the exception rather than the rule.
Thanks for nothing
Maybe when we think about human nature, it’s not so shocking that some individuals would have no problem taking millions for leaving a job. What might be more shocking is that investors large and small have been accepting the policy as set in stone and therefore somehow even rational.
Gigantic golden parachutes for individuals who are heading out the door are ridiculous and even economically unsound. Why aren’t the millions upon millions in compensation most CEOs take during their actual tenure reward enough?
Check back at Fool.com for more of Alyce Lomax’s columns on environmental, social, and governance issues.
The article CEOs With the Midas Touch originally appeared on Fool.com.
Alyce Lomax has no position in any stocks mentioned. The Motley Fool recommends McKesson. The Motley Fool owns shares of JPMorgan Chase.
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