Why do CEOs or Directors get a large compensation upon termination, while employees who are caught (for example sleeping during work) get nothing?

Was there an unconditional contract that allowed them to get this ammount even if they were not doing their job?

  • 2
    People at that level don't get fired for "not doing their job" or for "sleeping during work". They get fired for poor performance in their job. Poor performance can take many forms and can be measured in a multitude of ways.
    – joeqwerty
    Sep 2 '19 at 4:51

There are many reasons for this. One is that yes, it is in their contract. If I'm making a million a year somewhere and you ask me to give that up and come and work for you, and then it doesn't work out and I can't get things accomplished with the team and resources provided, so I have to leave, then I will get X as compensation for wasting my time and taking me away from a job I could have been great at. (You may not see a difference between sleeping on the job and not being able to accomplish a goal that required a lot of other moving parts to be in place to accomplish it; people who write these contracts do.) Without a contract like that, it's hard to get people to give up their million dollar a year jobs to come and take over at companies that need them.

Another is that people who make a LOT of money can easily afford to pay lawyers to help them sue for wrongful dismissal. And since "didn't meet goals" is rarely as cut-and-dried as "sleeping on the job", they may win those suits some times. And even if they don't, it costs a lot of money to defend against them. Some you might get back, like lawyers fees, but others you don't, like the time people take keeping notes in case there's a lawsuit, etc. Giving someone a severance payment in exchange for not suing can be cheaper overall.

There are others: these two probably cover the majority of cases.

  • Thanks for the reply. I find it hard to appreciate top talent. A directors job is pretty common sense. A level 2 manager in an organisation could probably do the same job, probably better cause be has more understanding of the organisation. I find that those positions are given based on connections or reputations.
    – Anthony
    Sep 2 '19 at 8:21
  • @Anthony I do not find that is the case. Yes, there are imbeciles who get promoted now and then but usually the people that land these sort of jobs have qualities that make them suitable for it. Sep 2 '19 at 10:08
  • 1
    Not realizing what the people above you in an organization really do or the skills they bring is unfortunate. It will limit the extent you can rise in the company and limit your happiness in your current job. But that is off topic for this question. Sep 2 '19 at 11:31

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