Significant benefits, including cash bonuses, stock options and severance pay, provided to a senior executive in the event of a merger or acquisition in which the executive is terminated; often used as a poison pill device to discourage unsolicited takeover attempts.
Advocates of golden parachute packages insist that these benefits help to attract and retain top talent. These packages may also hypothetically serve as effective poison pills in merger-prone industries in ways that are not as destructive as other poison pill strategies. By contrast, opponents of golden parachutes insist (understandably, especially given the level of wealth inequality that exists in modern America) that executives are already too-well paid and should not receive outrageous benefits for being terminated from their positions. Opponents also sometimes argue that even though golden parachute packages are mind-blowingly significant in regards to the average person’s financial reality, these packages represent such a small fraction of corporate interests that they do not effectively serve their function as poison pills.
Golden parachutes stand in contrast to golden handshakes in that golden handshakes confer significant benefits to an executive upon termination or retirement.
Executive One: “I’m sorry to hear that you’re out of a job due to the recent merger.”
Executive Two: “That’s okay. I’m taking my golden parachute benefits and buying an island in the Caribbean.”
Executive One: “You know… when the general public accuses us of being overpaid, they may have a point.”