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“Golden Parachutes are often negotiated at the time a CEO joins the business. CEOs are frequently head-hunted in - it's not like Goodyear places an advert on Craiglist, inviting applicants.
Because they're headhunting, inevitably the candidates are CEOs at slightly smaller companies - seldom, if ever, are they unemployed. As such, the company is asking the incoming CEO to give up a big package, and probably some stock that hasn't yet vested (because there's always a rolling set of stock options.)
This means that the offer has to be quite big to entice someone in.
Now, consider, companies that are doing boomingly well generally keep their existing CEOs, and expect them to come up with succession plans to 'keep the good stuff happening' (exhibit A: Apple). It's when companies are doing badly that they more frequently want a 'superstar' CEO to come in.
Any CEO knows in his (gender-specific pronoun intentional - they're almost always male - that's another question for another day) heart of hearts that turning round a failing company is hard - there's a high chance of failure. And more, he's being asked to join a company whose board/stockholders have just demonstrated a willingness to fire a CEO for underperformance.
So - the thinking goes - you want me to give up a good package to take on a job with a high likelihood of failure... tell you what, I'll do it, but I want a hedge - if you get rid of me, then I want $Y in compensation.
Now, where is the negotiating power?
Typically, by the time detailed compensation gets onto the table, the board have effectively made their decision, and 'fallen in love' with a particular candidate. That means that they are more likely to agree to such demands.
So, you'd expect to see Golden Parachute deals for incoming CEOs to companies that are already failing.”
Hmmm that sounds like a familiar senario…