Why getting it wrong still makes for a good payday
On the day that the BBC announces that Northern Rock, the troubled UK mortgage lender, will payback the £24Billion ($50Billion ) (story here)state loan back during 2010 - news also surfaces of the pay-offs for the ex board.
Adam Applegarth, Northern Rocks ex Chief Exec will get a payoff amounting to £785K and whilst share holders have initially criticized the decision - it must be remembered that the salary and benefits in the first place.
However it does raise the question of what should happen to senior executive’s remuneration in the event of business catastrophe - is it right that huge payouts can still be made when businesses fail?
One option is for employment contracts to cover remunerations in the event of business failure and whilst that may be administerialy possible is it entirely ethical? Going back the example of Northern Rock - Shareholders have the ability to vote down or disagree with business activity and Northern Rock was open to industry regulators - is this sufficient - if businesses fail but the company has behaved as expected then surely management are entitled to their pay?
Once thing certain is that this story will rumble on and won’t be the last “senior exec receives bumper payoff” story we’ll here as the credit crisis continues to bite.
