myz-vgb.ru A Business Encyclopedia

Golden Parachute

Definition: The Golden Parachute is an agreement between the company and the top executive(s), that he will be paid lucrative benefits in the event when a company is taken over by the other firm, and his employment gets terminated, as a consequence of merger or acquisition.

In other words, golden parachute is a clause in the employment contract, generally of top key executives, that employee will receive certain significant benefits as an inducement for early employment termination from the company due to a takeover. Benefits given to the employees include stock options, severance pay, cash bonuses or other benefits.

The golden parachute is a disputed concept. Supporters believe that this clause helps in hiring or retaining the top level executives, due to the lucrative benefits attached to it. These benefits enable an individual to remain objective in the firm, in case a firm is involved in a merger or takeover activities.

Also, the golden parachute contracts can be used as an anti-takeover measure taken by the company to discourage the takeover or a merger by any other firm, due to the huge cost associated with these contracts.

But however, opponents believe that it is the legal duty of every employee (including top executives) to act in the best interest of the company and, therefore, should not be given additional benefits to remain objective and perform activities that are advantageous for the company. Also, the top executives are already paid handsome salaries and should not be given any extra benefits in case of their early termination from the company.

Leave a Reply

Your email address will not be published. Required fields are marked *

Shares

Related pages


moratorium bankmodigliani miller approachalternatives to retrenchmentmotivational theory pptdefine abraham maslowlikert scale ratingsautocratic modelfranchising meaningblake & mouton's leadership gridmeaning of shortcomings in hindiwhat is indifference curve analysis what are its propertiesirr definationblackscholes formuladefinition of bureaucratic organizationexample product lineasset test ratio formulathe neoclassical theorywhat is the cash reserve ratioethnocentric management definitiongolden parachute meaningblake and mouton gridnational saving schemesanti takeover strategiesagency theory of motivationstate and explain the law of diminishing marginal utilitydefinition of golden parachutetravellers cheques meaningmeaning of diversifyingmeaning mouwhat is a scalar chainics inventory control systemcomplete enumeration definitiondiversify definewhat is a oligopoly marketmeaning of divestmentefficiently meaning in telugupoters five force modeldef of indifferentfayol 14 principlesdifferent market structures in economicsleveraged leasereinforcement theory by bf skinnerarbitrage trading definitionordinal scale in statisticssfa systemquata meaningpearson coefficient of correlation formuladefine laissez faire policymodigliani and miller approachwhat is the law of diminishing marginal utilitydelphi methodproperties of indifference curveslife positions transactional analysisproduct line exampleconsumer indifferencewhat is retained earninggrid method definitionsubstition methodwhat are sampling distributionscollusive oligopoly modelnarrow span of control disadvantagesethnocentric exampledistributive bargaining processdefinition of e-retailingmarket demand schedule definition economicsapproaches to ihrmdiminishing marginal utility examplesimplicit cost and explicit costmnc defineoligopoly productsnominal gross domestic product formulaadvantages of collective bargaining for both employers and employeesassets turnover ratio analysisdefine autocratmanpower inventorymeaning debentures