Business Ethics and Corporate Governance, Second Edition

SEVERANCE PAYMENTS

In industrially advanced countries such as the US, UK and Australia, the issue of severance payments to executives has received considerable attention in recent times and is being debated in the context of acceptable corporate governance practices.

There had been huge serverance payments made to executives which found wide publicity in the media and received critical comments from the public. Severance payments are made to a departing executive for the time remaining on his contract. Critics adversely comment on large payments in this regard because executives removed for poor performance are being rewarded too generously.

These payments, when effected under a contract the company had entered into with the executive could not ...