Golden parachutes benefit executives, court controversy

It describes a compensation bundle for a company’s apical executives that is triggered by their termination pursuing a merger oregon acquisition. They often see much than conscionable currency severance, specified arsenic continued wellness and payment benefits.

Some companies besides connection golden-parachute payments to executives who permission nether circumstances different than a merger oregon acquisition. This is sometimes called a aureate handshake.

The advantages of aureate parachutes see enabling companies to much easy prosecute and clasp apical talent, trim the anticipation of hostile takeovers, and region oregon chopped backmost conflict-of-interest problems during a merger, according to the Corporate Finance Institute, a supplier of concern grooming and certification services.

Critics complain, however, that aureate parachutes necessitate companies to ammunition retired a batch of wealth portion reducing executives' inducement to bash a bully job.

“Golden parachutes of sizeable size are present rather common,” said Harvard Law School Professor Lucian Bebchuk. “Their usage is inconsistent with the presumption that executive-pay arrangements should springiness executives incentives to absorption connected the agelong term.”

“Generous aureate parachutes promote executives to merchantability the institution earlier excessively long, pouch a ample payoff, and determination on,” helium added.

The word “golden parachute” dates to 1961 erstwhile creditors looked to oust the legendary billionaire Howard Hughes from power of Trans World Airlines.

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The creditors provided Charles C. Tillinghast Jr. an employment declaration that included a clause that would wage him if Hughes regained power of the institution and fired him.

Some of the biggest aureate parachutes of each clip see Jack Welch's bundle from General Electric (GE) successful 2001, which was estimated astatine much than $417 million, and Lee Raymond's from Exxon Mobil (XOM) successful 2005, which was astir $320 million.

Former Boeing (BA) CEO Dennis Muilenburg’s $62 cardinal bundle successful 2019 drew outrage pursuing 2 crashes of the aerospace giant’s 737 Max, which resulted successful 346 deaths.

CEOs successful the S&P 500 person been doing good for themselves lately, arsenic their wage reached a grounds for a 2nd consecutive year, according to the Institutional Shareholder Services 2025 Proxy Season Review.

Median S&P 500 CEO wage was $16.9 million, the highest wage level ever observed, the proxy advisory steadfast reported.