golden parachute is a contractual exit compensation package, in the event of a change of ownership of a company (Richards). In other words, if a company is sold or involved in a hostile take over the CEO will automatically receive a predetermined sum of money, thus allowing his or her descent from employment to unemployment to be buffered by a golden parachute. These golden parachutes usually involve millions of dollars.According to the executive compensation consulting firm Pearl, Meyer and Partners, stock options make up two thirds of a CEOs pay up from one third in the 1960s. Any increase in stock prices will cause an increase in the CEOs compensation. In 1996, thirty firms announced lay-offs of between 2,800 and 48,640 workers (Butoyi 92). Analysis of the leading job cutters revealed that their top executives, for the most part, were handsomely rewarded for wielding the axe. In 1996 the lay-off leaders enjoyed an average increase in total direct compensation of 67.3 %. Most of the job cutters increase in compensation came in the form of gains from stock options, reflecting Wall Streets trend to reward downsizers ( Mullican 66). Defenders of run-away CEO pay argue that market forces are at work determining CEO compensation levels and that CEOs are entitled to their compensation packages for increasing profits and raising stock prices. Human resources consultant William M. Mercer Inc. estimates that only one quarter of all stock option grants contain any sort of link to performance. On May 21 1998 Computer Associates gave its CEO Charles B. Wang shares totaling $670 million. This enormous stock grant exercise turned Computer Associates first quarter earnings of $194.2 million into a loss of $480.8 million. When the news reached Wall Street the companys stock price fell 30.7% in one day (AFL CIO). Boards of Directors are supposed to select and compensate CEOs. When it comes time to discuss compensation the golden rule is often rememb...
