A Golden Parachute is a contractual agreement that provides a substantial financial payout to executives if they are terminated due to a merger, acquisition, or company restructuring. This compensation package often includes cash bonuses, stock options, and other benefits. The purpose of a golden parachute is to attract top talent and ensure stability during leadership transitions.
Why do companies offer golden parachutes?
Companies use golden parachutes to retain top executives, protect them from hostile takeovers, and ensure a smooth leadership transition during M&A deals.
What is typically included in a golden parachute package?
Golden parachutes often include severance pay, accelerated stock vesting, bonuses, pension benefits, and healthcare coverage.
Are golden parachutes controversial?
Yes, they can be controversial, especially if executives receive large payouts despite poor company performance. Shareholders sometimes oppose them due to concerns over excessive executive compensation.
How do golden parachutes affect mergers and acquisitions?
Golden parachutes can make M&A deals more costly but also help executives support the transition without fear of job loss, reducing resistance to a takeover.
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