The life of the corporate captain has been getting better over the last 40 years, at least for people at the top. The gap between executive pay and the average American worker gets bigger every year, largely because there are fewer regulations to protect workers’ rights and keep executive pay at bay.
This situation with Henrique de Castro is a perfect example of the kind of excess that threatens to do significant harm to the long-term global economy. Castro is a former executive with Yahoo who was fired and given what is believed to be the largest compensation package ever to an ousted executive.
Henrique de Castro is leaving Yahoo with an severance package estimated to be more than $60 million, one of the largest golden parachutes ever given to an executive who was fired.
de Castro, the chief operating officer, was shown the door by Yahoo (YHOO, Fortune 500) CEO Marissa Mayer, apparently due to disappointing performance in improving Yahoo’s advertising revenue. Mayer reportedly wrote in a memo to staffers this week that said, “I made the difficult decision that our COO, Henrique de Castro, should leave the company.”
Experts in executive compensation say the larger nine-figure exit packages given to some executives are typically for those who retire, voluntarily leave a company or leave upon the purchase of their company.
“As a pure severance package due to performance-related termination, de Castro’s exit package is definitely at the top end of the severance we have seen,” said Gary Hewitt, the managing director and head of research at GMI Ratings, an expert in corporate governance issues.
Financial Juneteenth Lessons from this story: 1) The world is changing economically and there has rarely been a time when it was more important to learn how to start your own business and creative alternative streams of revenue. Corporate America takes care of its executives, but is not so willing to take care of you.
2) Executive pay, while it is certainly too high, is also driven by market forces. Yahoo didn’t voluntarily agree to give away this much money for no reason. There is a good chance that de Castro was expected to generate at least as much revenue as he was paid for doing his job. The key point is that if you want to get a high salary with an organization, figure out exactly how you’re helping them to make money. The compensation will follow. If you’re truly worth what you think you are, you should be able to find someone willing to fairly compensate you. If you can’t find anyone to give you that amount, then you may be overestimating your value.