Golden Parachute

Golden Parachute: A golden parachute is a financial agreement between a company and its top executives that provides significant benefits if they are terminated, especially due to a merger or acquisition. These benefits typically include large severance packages, Stock Options, and other financial incentives designed to cushion the executive’s transition out of the company.

Examples:

• When Company A acquired Company B, the CEO of Company B received a golden parachute worth $10 million, including cash and Stock Options.
• A technology firm offered its CFO a golden parachute that guaranteed 2 years’ salary plus bonuses if the CFO was let go following a takeover.

Cases:

• In 2008, the financial crisis led to public outcry over golden parachutes when major banks, like Bear Stearns, paid their executives substantial severance packages despite government bailouts.
• The merger between two major airlines resulted in a golden parachute for the outgoing CEO that sparked controversy among Shareholders and the public.