As banks like Merrill Lynch & Co., Inc. (NYSE: MER) and Citigroup Inc. (NYSE: C) lay off employees in the wake of massive writedowns, some employees, rightfully so, are wondering: Where's my severance package?

Think about it. CEOs like Stan O'Neal and Chuck Prince were responsible for their companies' broad, long-term vision -- it was a vision that turned out to be ill-conceived. When they were pushed out of the executive suite, they received huge paydays. And yet the rank-and-file workers who were hired to carry out these ill-fated visions are being cut loose with little in the way of severance.

Sound unfair? The people who were responsible for the strategies that led to huge losses and the destruction of shareholder value got hundreds of millions. The people who worked in good faith to execute those strategies got shafted.

The Washington Post ruminates on this paradox:

The real frustration is that there's so little that can be done. Shareholders supposedly have access to the courts for a remedy, but they won't get far. A stockholder suit filed more than two years ago challenging the Morgan Stanley payoffs languishes in court. The CEO-and-director club knows that pro-business judges in the corporate haven of Delaware and elsewhere in the legal system will protect them. Shareholder suits against Time Warner's Levin got nothing back from him.

So what can you do? Probably not much. But as an investor, you should keep in mind a few things. Companies paying outrageous severance to failed leaders suffer from corporate governance problems. Would an effective board of directors grant packages like the one Robert Nardelli received?

Investors should hold stocks with poor governance practices at their own risk. They can often be a harbinger of deeper problems. It's easy to quantify the cost of overcompensation -- it hits the income statement. But the cost of poor governance can be much more serious, and is not so easily quantified.