Golden Parachute
Definition of 'Golden Parachute'Substantial benefits given to a top executive (or top executives) in the event that the company is taken over by another firm and the executive is terminated as a result of the merger or takeover. Golden parachutes are contracts given to key executives and can be used as a type of antitakeover measure taken by a firm to discourage an unwanted takeover attempt. Benefits include items such as stock options, cash bonuses, generous severance pay or any combination of these benefits.Also known as "change-in-control benefits." |
|
Investopedia explains 'Golden Parachute'Golden parachute clauses can be used to define the lucrative benefits that an employee would receive in the event he or she is terminated; however, the term often relates to terminations that result from a takeover or merger. The use of golden parachutes is controversial. Supporters believe that golden parachutes make it easier to hire and retain top executives, particularly in merger-prone industries.In addition, proponents believe that these lucrative benefits packages allow executives to remain objective if the company is involved in a takeover or merger, and that they can discourage takeovers because of the costs associated with the golden parachute contracts. Opponents of golden parachutes argue that executives are already well-compensated and should not be rewarded for being terminated. Opponents may further argue that executives have an inherent fiduciary responsibility to act in the best interest of the company, and, therefore, should not need additional financial incentive to remain objective and to act in the manner that best benefits the company. In addition, many people who disagree with golden parachutes cite that the associated costs are miniscule when compared to the takeover costs and, as a result, can have little to no impact on the outcome of the takeover attempt. |
Related Definitions
Articles Of Interest
-
Mergers And Acquisitions: Understanding Takeovers
In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game. -
Evaluating Executive Compensation
Find out how to determine whether a CEO is being overpaid. -
A Close-Up On Gross Ups
Learn about this hidden perk and why it's often bad news for investors. -
Pages From The Bad CEO Playbook
Excess compensation, golden parachutes, tunneling and IPO spinning make these bad executives even worse. -
10 Great Summer Jobs For Teens
There are a lot of summer jobs out there, find out what's available, how much it costs and what skills you need. -
The Path To Becoming A CEO
Think you have what it takes to be chief executive? Find out what those at the top have in common. -
Playoff Perks For Pro Athletes
If personal pride, a stellar resume and increased job security aren't enough incentive for some pro athletes, each league has reserved a bit of lunch money to up the ante and help tide athletes ... -
Warding Off Hostile Takeovers
The purpose of this article is to provide a general overview of hostile corporate takeovers, while highlighting a general course of action against such activity. This article provides basic ... -
Joh. A Benckiser Looks To Corner The Coffee Market
Joh. A Benckiser is paying a huge price for the European coffee maker. What does this mean for the rest of the world's coffee manufacturers? -
Dominion Diamond Goes Shopping - Should You?
These are exciting times in diamond mining, is it time to buy?