HR professionals have been warned to check the employment contracts of their most senior staff to make sure they do not cost millions of pounds by rewarding failure.
Legal experts said that UK employers spent up to £100m last year on payments to executives who left under a cloud.
It emerged earlier this year that senior figures at Northern Rock were paid bonuses despite the beleagured bank needing billions of pounds of public money to survive.
Tom Flanagan, employment partner at law firm Pinsent Masons, said: “The time may have come to consider introducing new structures to employment contracts.
“Most people would not object to high rewards for those who create wealth and otherwise achieve – but not for simply being there, and certainly not for failure.”
The obvious way to avoid large pay-offs is to pay less in salary and more in performance-related bonuses, according to Pinsent Masons.