Don’t we all deserve a parachute?

In many forums, I’ve heard discussions and justification of the Golden Parachute. A Golden Parachute is a part of an executive’s compensation package that applies when (s)he is terminated, like a severance package, although it can also apply if the person is fired for cause or dismissed by the board or even if the person leaves the role voluntarily for another job or to retire. The concept got specific criticism during the financial crisis and bailouts, and it’s been a point of debate in business compensation for quite some time. The justification for these payouts is that it allows a high level decision maker, like a CEO, to take greater risks without being biased by the consequences of failure. Thus, in high risk/reward industries, like finance and innovation, the parachute tends to be larger. It also keeps the executive from being biased against a takeover or buyout that might actually be beneficial to the company.

Critics of the golden parachute say that it adds to already overblown executive compensation packages. They further note that an executive is already paid to keep his/her biases in line and doesn’t require further economic incentive. Finally, opponents of the golden parachute will note that perhaps executives shouldn’t be incentivized to take those risks, that they should be penalized for failure. Proponents then counter that, relative to direct compensation, the parachute is actually small and does represent a penalty of sorts but simply keeps the executive from making decisions based on personal loss.

Personally, I do believe there’s value in a golden parachute. I believe a CEO, in particular, needs to be able to make decisions without day-to-day worry. While Conservatives and Republicans (possibly not the Tea Party) generally do not have any issue with these executive compensation packages and the associated parachutes, they often speak with rampant disdain about socioeconomic equivalents, specifically social programs that provide minimum income, health care, food, and shelter. Did your attempt to start a small business fail, leaving your family destitute? Too bad, say Romney and others. You’re just not taking personal responsibility. Did your risky investment in the stock market fail to pay off? Well, Ms. Retiree, I hope you’re not depending on Medicare or Social Security, says Paul Ryan and others. After all, it’s important that you accept the consequences of your failure.

Shouldn’t we all be incentivized to take risks, to start new businesses, to pursue an innovation or experiment, or to pursue an altruistic opportunity? Does it really benefit our economy for our citizens to be so risk averse? Don’t new businesses and ideas help our economy and our nation? Why is it okay for an executive deciding voluntarily to leave his position for an altruistic endeavor to get compensated for taking that risk while most Americans leaving their job for a similar reason would be facing not just poverty but the scorn of Republicans for their poor decisions and planning?

Republicans often cite the idea that paying people not to work inspires laziness. For all my criticism of Romney, despite getting a handsome compensation for leaving Bain, I don’t think anyone could call him lazy. He went on to work on the Salt Lake City Olympics and now is running for President. If getting tens of millions of dollars, enough to live well for multiple lifetimes, doesn’t inspire someone to laziness, why would anyone think that a wage barely sufficient to survive would inspire laziness?

Perhaps it’s easier, quippier even, for Republican talking heads to talk about handouts when discussing programs like Medicare, Medicaid, Social Security, Welfare, and Food Stamps. Really, we should be looking at these government programs as a parachute for all of us, a last resort if our dreams and aspirations don’t pan out. Sadly, that parachute is far from golden for most of us. In fact, it’s peppered with holes. Perhaps if those programs were made better, perhaps if we were all guaranteed a period of time to recover after leaving a job or if a business fails, we would have more small businesses, more personal innovation, and more success for the middle class rather than a wage gap that grows larger every day.

I am lucky, very lucky, to have a parachute. My job was eliminated, but thanks to my years of service and the WARN Act (passed in spite of Ronald Reagan in 1988) and Illinois’ modifications to it, I have a silver, if not golden, parachute. I have financial security while I find a new job. The peace of mind that brings is extraordinary. But, more importantly, because of that, I am more likely to find the right job rather than jumping into a position that I would leave after a short period of time. This benefits all companies in reducing costs due to employee churn. I’m more likely to find a better paying job, and I’m more likely to look into options like starting a business. This benefits our tax system in that I’ll potentially pay more into the system.

Imagine if we all had that level of security. Imagine if, even if you left your job voluntarily, you were guaranteed some portion of your pay to assist with the transition. It is, of course, not in your company’s best interest to offer this, but it is in our nation’s best interest. Imagine what people would accomplish given that level of freedom. Would our parks be cleaner? Would our people be happier? Would we all be healthier?

Really, don’t we all deserve a parachute?

3 thoughts on “Don’t we all deserve a parachute?”

  1. I’m so thrilled that you’ll want to pay for my parachute. After all “the nation” can’t provide that freedom if you (& lots of you’s like you out there) aren’t willing to fund it out of your paycheck.


  2. …only if you pay for mine, too.

    Just a thought: It seems there is a lot of worry over people getting something for nothing or getting greedy about “handouts”. Perhaps if people weren’t afraid, they wouldn’t get all grabby?

  3. Actually, if the system were structured similar to the existing Unemployment system or to the WARN act, it would be funded by employers. It would become part of the cost of employee churn, thus further incentivizing employers to avoid lay-offs and job losses. There would have to be some kind of provisions, similar to UI, to avoid abuse…but it’d be an interesting idea. None of that, of course, is ever going to happen because the very people who get golden parachutes right now would never allow it.

    But…for the existing social programs, yes, we do fund those through payroll and income taxes, same as we fund the military and wars and the NEA and tons of other things.

    I do agree that perhaps if people weren’t in such fear and such need, the grabbiness would be minimized. There’s actually a really good article on Cracked (of all places) about the stupid habits that we/people develop by growing up poor:

    I can’t help but think that if there wasn’t that fear, that people would be more rational actors in the economy, which would further enable the free market. Rather than social programs becoming a neverending “suck” as some theorize, they’d gradually become less necessary because we’d become smarter people and consumers over generations.

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