anecdote

In the today's newspaper, in context of polemic related to these stupid golden parachutes for business leaders, one can read this deplorable story that happened for 61000 people working for Ericsson.

A program of bonus was proposed by the management and proposes to distribute 42.3 millions of actions to the employees, in which they can invest up to 7,5% of their salary. In short, an average bonus of 5%. A way to share with them the value they contributed to produce.

So yes, great, but no. Wednesday, during the general assembly, a group of shareholders, mainly Americans, controlling 11,5% of the capital, used the Swedish legislation to cancel this plan, purely and simply. 0%, this is the final bonus the employees will receive. Well I'm rich, Amerloc, and I go to the other end of the Earth just to annoy thousands of people.

The conclusion is that irritates me, that no one can do something except perhaps the (Swedish) Secretary of State to the Ministry of Justice who studies the possibility of modifying the legislation. The latter requests, for the moment, 90% of agreement to adopt a decision.

Source: le monde, on friday.
For those who do not know: A golden parachute is a clause (or several) in an executive's employment contract specifying that they will receive certain large benefits if their employment is terminated. Sometimes it is only in the case that the company is acquired and the executive's employment is terminated as a result, but not always. These benefits can be severance pay, cash bonuses, stock options or a combination of the items. The benefits are designed to reduce perverse incentives.
The use of golden parachute have caused some investors concern since they don't specify that the executive had to perform successfully to any degree. Their concern is understandable since many golden parachute clauses can promise benefits well into the millions. In some high-profile instances, some executives cashed in their golden parachute while under their stewardship their companies lost millions and thousands of workers were laid off as a result.

Labels: anecdote