Why Are We Rewarding Failure?

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Failure is inevitable, and sometimes one of the best things a person can go through to improve. A person's success is measured by how they bounce back form failure. Failing a test, getting yelled at by the boss, gaining weight etc...there are numerous examples of failing. James S. Stewart, columnist for The New York Times, discusses failure in the workplace, and why people are being rewarding when they fail in his article Let's Stop Rewarding Failure:

So why is H.P. paying Mr. Apotheker more than $13 million in termination benefits?

Just three years after the financial crisis generated widespread public outrage that Wall Street chief executives walked away with hundreds of millions in bonuses and other compensation after driving their companies into insolvency and plunging the nation’s economy into crisis, multimillion-dollar pay for failure is flourishing like never before. H.P. is simply the latest example, albeit an especially egregious one. It’s hard to fault Mr. Apotheker for taking what H.P. offered. But among the many questions shareholders should be asking the board is why it approved an employment agreement for Mr. Apotheker that arguably made it more lucrative for him to fail — and the sooner the better — than to succeed.

“It’s a great irony that spectacular failure is rewarded lavishly,” John J. Donohue, a professor at Stanford law school and the president of the American Law and Economics Association, told me. “It is a terrible mistake to set up a structure where the top person walks away with millions even if the company is laid waste by their poor decision-making, yet this is what’s happening. It’s a shocking departure from capitalist incentives if you lavish riches on the losers.”

He added that it’s especially shocking at H.P., which fired its previous two chief executives before Mr. Apotheker and had to make multimillion-dollar payments as a consequence. “After what H.P. had gone through, you’d think the board would have been on their toes rather than asleep at the switch again,” he said.

Experts said Mr. Apotheker had what amounts these days to a fairly standard termination agreement for a chief executive. In the event he was terminated for “cause,” his contract, a summary of which HP filed as an exhibit to a Securities and Exchange Commission filing, provided a cash payment of twice his base pay (of $1.2 million, or $2.4 million); his earned but unpaid bonus (his “target” bonus was $2.4 million per year); any accrued but unused vacation — and “no further compensation.” That would add up to a maximum of about $4.8 million. But he wasn’t fired for cause.

Read more at The New York Times