After 15 years working at a small, family-run business, you have received an offer for a new opportunity in a large corporation. During a series of interviews with executives in the company, you learn about a variety of avenues to move up the corporate ladder. You believe that the position as a department manager provides you an opportunity to join a company where you could spend the rest of your career. As an executive position with the company could be in your future, you think that you should learn more about the compensation that executives at this company receive. Further, you want to make sure that you will be joining an organization that behaves ethically and pays all employees fairly.
You have a concern about what you have heard in the media about excessive executive compensation in large companies such as the one you are thinking about joining. You have read stories about public protests of large corporations and have also heard about executive scandals in which organizational leaders have inflated expenses to companies and spent money on excessive parties and furnishings for private residences. You are curious about whether such protests or scandals have involved your potential future employer.
You start to research this issue and are relieved to learn that there have not been any executive scandals at this organization. There is an article, however, about a previous CEO receiving a platinum parachute. You aren’t sure what this means, but you understand that the company lost quite a bit of money while that person was the CEO, and it seems as if he still received a fairly generous separation package from the company. The article also states that most top executives at this organization have a golden parachute clause in their contracts, and you aren’t sure what the difference is between platinum and golden parachutes.
The company is publicly held, and you learn that its executives do participate in an incentive stock option plan. Executives are granted a certain number of stock options each year that they are able to exercise after five years. As a result, there is an incentive for executives to work to increase the overall value of the company stock. This part of executive compensation seems to make sense. You hope that someday you also will be rewarded by the company’s success.
In the company’s annual report, you are able to see the total compensation of many of the company’s top executives, and overall, it seems that the executive pay and benefits at the company are not generally considered to be excessive. It also seems that executive compensation is attractive and in line with something that you should aspire to receive. Based on your research so far, this opportunity might just be the right move for your career.
What is the purpose of the platinum parachute? Why would the company provide this benefit? How does it compare to the golden parachute?
Why does the company offer an incentive stock option plan?
What other protections are in place for the shareholders and employees relative to executive compensation in organizations?