golden parachute


Also found in: Dictionary, Thesaurus, Legal, Idioms, Encyclopedia, Wikipedia.
Related to golden parachute: greenmail, poison pill, Silver Parachute

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 ?
Federally insured credit unions that are insolvent, in conservatorship or have ratings of CAMEL 4 and 5 would be prohibited from offering golden parachutes to their executives under a proposed rule unveiled by the NCUA at last Thursday's meeting.
We fail to see how the board of directors could possibly justify these golden parachutes as representing the best interests of Coalcorp or its shareholders"
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.
The IRS did specify four types of payments that would not be considered part of a golden parachute and would not be subject to penalty, regardless of their size.
This 25-page research report written for both attorneys and executives, features the main components of executive compensation plans, particularly golden parachute arrangements.
In 2003, AB LongView proposals have received nine majority votes to date, including majority support for golden parachute proposals at Union Pacific, AK Steel and Sprint.
One month after these contracts were agreed to--and following enactment of the golden parachute rules (IRC sections 280G and 4999)--Jewel and the executives changed the agreements, reducing the amount of severance pay so there would be no "excess parachute payments" under the newly enacted rules.
The California State Teachers' Retirement System (CalSTRS) -- which holds nearly US$726 million in GlaxoSmithKline (GSK) stock -- has revealed that the fund had "directed all of our international managers that held the stock to vote against the proposal," on a proposed and controversial US$36 million golden parachute for Glaxo CEO Jean-Pierre Garnier should he resign or be removed as CEO of the company.
The golden parachute rules apply only if payments are made contingent on a change in a corporation's ownership, in effective control of the corporation or in the ownership of a substantial portion of the corporation's assets.
May 15 /PRNewswire/ -- The California State Teachers' Retirement System (CalSTRS) -- which holds nearly $726 million in GlaxoSmithKline (GSK) stock -- has revealed that the fund had "directed all of our international managers that held the stock to vote against the proposal," on a proposed and controversial US$36 million golden parachute for Glaxo CEO Jean-Pierre Garnier should he resign or be removed as CEO of the company.
An arbitrator in February ruled that the hospital had no cause to fire Abraham, but said a controversial golden parachute consulting contract was invalid.
As we ask CalSTRS today to echo the call on GSK for increasing access to AIDS drugs via voluntary licensing -- something which could truly bring prices down to $300 -- we also implore CalSTRS to use their clout as an investor in Glaxo to vigorously oppose this outrageous $36 million golden parachute for Mr.