Q&A: Do CEOs really have a duty to the shareholders if they get large golden parachutes?

Question by trer: Do CEOs really have a duty to the shareholders if they get large golden parachutes?
Their decision making affects the shareholders, but if they mess up, there is no consequence to the CEO except that he gets fired but gets his severance package. Why isn’t performance tied to the contract instead?

Best answer:

Answer by mantastic86
Trer,

That’s great question.

I adamantly agree with you because CEO’s should have a duty to the shareholders when they have golden parachutes and their performance should be tied to the contract.

Here is why:

1.) Being “let go” or “being fired” is a risk in any occupation, and executives are already well compensated. So why should they get a severance package on top of that? It makes no sense.
2.) Executives already have a fiduciary responsibility to the company, and do not need additional incentives to stay objective.
3.) Golden parachutes costs are a very small percentage of a takeover’s costs and does not affect the outcome.

I’m glad to see someone sees this the same way I do. It makes me cringe when I think of a CEO getting a golden parachute and not living up to the responsibilities and duties of being a competent CEO.

Hope this helps….

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