Why Failing CEOs Still Get Rich
Imagine being fired for tanking a company—and walking away with millions. For most of us, failure comes with consequences. But for some CEOs? It comes with golden parachutes worth more than most of us will see in a lifetime. Welcome to the wild world of corporate leadership, where failing upwards isn’t just possible—it’s practically a career strategy.
When Failure Pays: The Most Infamous CEO Exits
Some CEOs have turned spectacular failure into a lucrative payday. Let’s talk about a few infamous examples:
- Adam Neumann of WeWork was ousted after steering the company toward financial collapse, yet left with a $1.7 billion exit package. Spoiler alert: WeWork never turned a profit.
- Dennis Muilenburg of Boeing walked away with $62 million after the tragic 737 Max disasters—an incident that cost 346 lives and shattered public trust.
- Steve Easterbrook, the former CEO of McDonald’s, received a multi-million-dollar exit payout despite being fired for misconduct.
So why do these executives leave with their pockets lined? The answer lies in a complex web of corporate norms, risk-taking incentives, and—let’s be honest—some seriously flawed systems.
Why Experience Trumps Performance (and Why That’s a Problem)
In corporate America, hiring executives often feels like an exclusive club where experience matters more than results.
- Companies love hiring CEOs from management consulting giants like McKinsey, Bain, and BCG.
- Yet, a Harvard Business Review study found that CEOs with engineering backgrounds consistently outperform those from consulting backgrounds.
So, why the obsession with experience? Because hiring a CEO with a shiny resume feels like the safer bet—even if it’s not. Unfortunately, this risk-averse mindset often means prioritizing “safe” hires over the best candidates.
CEO Turnover: High Stakes, Big Payouts
The turnover rate for Fortune 500 CEOs is around 10% annually, and 70% of those leaders are ousted by their boards. The average tenure? Less than five years.
This short window leads CEOs to negotiate hefty exit packages before they even take the job. It’s like having a safety net made of gold:
- CEOs know they’re under pressure to deliver fast results.
- Pre-negotiated golden parachutes protect them if they get the boot.
- Ironically, this structure encourages risk-taking since there’s little personal financial downside.
Incentives: Protecting CEOs at Shareholders’ Expense?
These golden parachutes aren’t just about rewarding failure—they’re about protecting CEOs in high-stakes roles:
- Exit packages can be beneficial for shareholders if they encourage CEOs to pursue bold strategies that boost market value.
- They also protect CEOs from hostile takeovers, ensuring they won’t resist deals that could be profitable for investors.
However, there’s a darker side:
- Powerful CEOs, like Elon Musk, can leverage their influence to demand significant rewards.
- Such power dynamics can harm shareholder interests, especially when controversial decisions affect stock prices.
How CEO Decisions Shape Company Value
CEOs have the power to move markets with a tweet—or a badly timed decision:
- Elon Musk’s public statements and demands for more Tesla shares caused shareholder anxiety and potential dilution of stock value.
- A CEO’s influence extends beyond company operations—it impacts investor confidence and market valuation.
Corporate boards constantly juggle the need to maintain executive influence while safeguarding shareholder interests—a tricky balancing act.
The Systemic Problem: Why Failing Upwards Keeps Happening
Despite public outrage, the system is designed to protect executives more than it punishes them:
- Boards fear disrupting leadership stability by fighting executive contracts.
- The cultural obsession with “proven experience” often leads companies to rehire failed executives elsewhere.
In essence, golden parachutes have become standard practice—so much so that failure often feels like a cushioned fall rather than a hard landing.
Can We Break the Cycle?
Fixing the system isn’t easy, but here are a few ideas:
- Tie exit packages to long-term performance rather than short-term stock gains.
- Increase transparency around executive compensation and board decisions.
- Prioritize proven performance over traditional experience in hiring decisions.
The Bottom Line: The High Cost of Failure
In corporate America, failing upwards isn’t a bug—it’s a feature. CEOs might leave their positions in disgrace, but their bank accounts are anything but empty. Until boards prioritize accountability over flashy résumés, the cycle of rewarding failure will continue—and shareholders will keep paying the price. The next time you hear about a CEO walking away with millions after a scandal, remember: In the boardroom game of Monopoly, some players never lose—they just collect $200 (million) on their way out.
All writings are for educational and entertainment purposes only and does not provide investment or financial advice of any kind.
