golden parachute

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Golden parachute

Compensation paid to departing top-level management by a target firm if a takeover occurs.

Golden Handshake

A clause in a high-ranking executive's hiring contract describing a lucrative severance package once the executive leaves the company. The package often includes cash and stock options worth millions of dollars, as well equity in the company. The executive is normally eligible for a golden handshake regardless of the circumstances under which he/she left the company, whether retirement, redundancy brought about from a merger or acquisition, or termination for mismanagement. Controversy surrounding the practice tends to increase in times of increased mergers, as well as in economic downturns.

golden parachute

An employment agreement that provides a firm's key executives with lucrative severance benefits in the event that control of the firm changes hands and that shifts in management subsequently occur. A golden parachute benefits management more than the stockholders. Also called golden umbrella. See also silver parachute.
Case Study After a rocky year that included embarrassing financial disclosures and a plummeting stock price, one-time high-flying Enron Corporation was forced in November 2001 to seek a major cash infusion to shore up its balance sheet. Improper accounting caused the Houston-based energy trading company to disclose that the firm would reduce four years of previously reported income by over half a billion dollars. The company was also forced to write down assets and reduce shareholders' equity. Competitor Dynegy, Inc., came to Enron's aid by proposing an all-equity $8.85 billion takeover. Enron's chairman, Kenneth Lay, was eligible for severance benefits under certain circumstances, including a change in management that resulted in a termination of his employment. Lay had worked at the firm since 1984, when it was a regional pipeline company operating under as Houston Natural Gas Company. The golden parachute was to pay Lay a lump sum of $20.2 million for each year remaining on his contract. The chairman had three years remaining at the time of the Dynegy offer, meaning he was entitled to receive a lump-sum payment of over $60 million. To the surprise of many, Lay announced at a meeting with Enron employees that he would waive his right to the severance pay. As it turned out, the Dynegy offer was shortly withdrawn and a month later Enron was in bankruptcy. Information released following the bankruptcy indicated that Enron executives had personally profited in financial dealings with the firm.

golden parachute

see TAKEOVER BID.

golden parachute

see TAKEOVER BID.

Golden Parachute

An agreement entered into by a corporation with its top executives to make payments to the executives in the event of a change in corporate control. Such payments are treated as compensation.
References in periodicals archive ?
The board may have had legitimate reasons for amending the executive employment agreements in connection with the merger, but most shareholders would not consider supplementing already generous golden parachute payments to be among them.
That's when golden parachutes really got expensive.
The NCUA Board would have final authority over whether a golden parachute is allowed and the criteria it uses will include what degree the employee had managerial or fiduciary responsibility; the length of time the employee was affiliated with the credit union and does the payment represent a reasonable payment; and any other factors that could be considered.
The two most popular tax approaches for golden parachutes are
Wally, an employee, manager and inside director, thinks of his own self-interest and economic well-being - that is, golden parachutes.
It explores the most common types of golden parachutes and the trigger events that they are based upon.
Other senior executives would get smaller golden parachutes of three years' salary, two years of bonus pay and stock, according to the proxy statement.
According to Trumka, "large CEO pay packages make golden parachutes redundant and an unnecessary expense to America's working families who are shareholders through their pension funds.
These golden parachutes aren't unreasonable, said Keith Davis, director of compensation at SNL Securities, a Virginia-based research firm specializing in the financial services industry.
Seventy four percent of the 2003 resolutions were tied to corporate governance issues, which include matters such as executive compensation, option shares and golden parachutes, while twenty six percent were related to social and environmental issues.
Whitman's announced on May 27 that its board was considering whether to withdraw the offer or lower the offer price to reflect the increased costs associated with the defensive actions -- particularly the golden parachutes, which the Whitman's board said were excessive given the financial performance of the Company.
For a bankrupt company that is doling out millions in golden parachutes to top executives to say that it must cut off the health care benefits of people who worked a lifetime in the mills is a disgrace," said USWA International President Leo W.