golden parachute


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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 ?
Golden Parachute Tax Solutions is a nationally recognized Certified Public Accounting firm which specializes in IRC Section 280G Computations & Advisory Services.
After reviewing the different factors, the court concluded that part of the compensation was unreasonable and therefore were nondeductible golden parachute payments.
Thus, the longer the board tenure, the greater the likelihood of a golden parachute. However, this argument is not completely straightforward.
According to ABC News, it is common practice for executives of big organizations to get golden parachutes when they retire or are terminated, and Strauss-Kahn's deal with the IMF is no different.
CUNA Senior Vice President and Deputy General Counsel Mary Mitchell Dunn wrote that the board should permit credit unions to make golden parachute payments to former executives of insolvent or CAMEL 4 or 5 credit unions if the executive "was not involved in causing the loss."
There was more industrial unrest this week when Airbus workers at Nantes and Saint-Nazaire in western France extended a week of wildcat strikes over an annual bonus offer of 3-5 euros each, which they called derisory next to Mr Forgeard's golden parachute.
The time devoted to business must be expressed as a percentage, as opposed to "part" or "as needed." This section does not apply to "golden parachute" payments, as defined under Sec.
The section on formal corrective actions has been revised to discuss the existing restrictions on, and requirements for, severance payments made to institution-affiliated-parties (so called "golden parachute payments").
WHEN energy boss Sir Richard Giordano left BG Group, he didn't just get a golden parachute but an office to match.
NAPF joined a shareholder rebellion last year over the pay deal for the chief executive, which included a "golden parachute" clause that entitled him to double his annual package if there was a change of control.
Auditors examining these businesses will focus on nonqualified deferred compensation, stock-based compensation, the $1 million cap on deductions for compensation paid to public company officers, golden parachute arrangements, split-dollar life insurance, fringe benefits and the use of two "listed transactions" (those specifically identified by the IRS as tax-avoidance transactions or expected to produce the same or similar tax consequences).
French-born chief executive Dr Garnier was reported to be ready to give up part of the pounds 22m "golden parachute" package he would have received if he lost his job.