Golden Parachutes

After defining golden parachutes, this entry will discuss their scope of coverage, the components, the amounts paid, the purposes of golden parachutes, and the criticisms of their use. This selection will then address the legal controls of golden parachutes, the tax aspects, and the corporate governance aspects.

Black’s Law Dictionary defines a golden parachute as “an employment-contract provision that grants an upper-level executive lucrative severance benefits—including long-term salary guarantees or bonuses—if control of the company changes hands (as by a merger).” Most other definitions of golden parachute offered by legal authorities are similar and stress three elements: (1) a lucrative or attractive severance package, (2) available to a few selected senior executives, and (3) in a change of control situation for the company. Some also define ...

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