Time and again, we see CEOs and similar executives make horrible decisions that massively damage a company both financially and in terms of reputation and the perpetrator is forced to resign, yet receives so much money as a going away present you’d think they’re being rewarded for their fuck up. Why??
Because they want CEOs to be willing to take risks to grow the company. Risks are risky, and thus a CEO who wants to keep making money from working there will be unwilling to take risks that might get them fired if they fail. Thus they ensure that the CEO will make money even if the risk fails so they will be willing to try things rather than trying nothing serious and stagnating growth.
Now, problem is, ceo tenure doesn’t tend to last very long these days, even when they do succeed, and CEOs usually get bonuses based on how well the company does under them.
Combine that with the golden parachute, it is in their interests to constantly make hail marries on explosive growth, because if they get fired for the fuck up they make as much money as if they stayed the full time they’ve got a contract for, which is probably as long as they would have stayed as at they will make more money sighting a new contract with another bigger company now that they have more experience, and if it succeeds they make bank on bonuses.
This is ignoring the long term consequences of incentivizing short term thinking and aggressive risk taking, but that’s not what management consultants care about.