How are executive payouts justified? ?

Question

I appreciate as much as anyone that when you work hard enough to become a corporate CEO, you're worth a few bucks and a decent pay cheque.

But when a CEO retires - quite often after only a year or two - how on earth is it justified to literally fork out millions in payouts?

Recent examples include bank CEOs being paid in excess of $10 million.

Given the scrimping at the sharp end in most companies to "build profit" - how on earth are such massive payouts justified?

Answer 1

if i give you $10 AND tomorrow you give me back $20 its a good deal right ?

and if you kept doing this but told me you wanted to keep $2 each time I'd still make out right ?

Thats how ceo's name their price.

Answer 2

As with anything, the massive payouts are usually justified by supply and demand.  The argument is that there are a limited number of people who can successfully run a big company.  In order to get these people, you have to compete against other companies looking to hire these people.  By making the payouts back-loaded (at retirement), companies believe they are looking the talent in for a period of time (as opposed to making the big payments up front where the person can collect and walk away).

Whether or not the upper managers are worth these payouts is a different argument that has been discussed in the financial and scholarly journals for years.