Golden Parachutes
Golden Parachutes
ENG 101
Professor James Lange
During the financial collapse of the economy that Americans have been dealing with for the past 5 years, Golden Parachutes have become a controversial topic. A Golden Parachute is defined as an agreement between an employee (in most cases an upper level executive) and a company that offers the employee specified additional benefits if the employee is terminated. In the past, most Golden Parachutes required that the termination was as a consequence of a merger or acquisition. But more recently the phrase has described executive severance packages unrelated to a change in the ownership of the company. This may include additional bonuses, stocks, severance pay, or other benefits. While high profile CEOs are justly compensated during their tenure and no further compensation is justified at separation, a Golden Parachute is not only a way of compensating a talented CEO for the millions of dollars in revenues they have brought to the company and its shareholders, but it can also protect a company from an unwanted takeover. Like most executive level severance agreements, a Golden Parachute is intended to provide the manager with a source of income while he or she searches for a new job. Some corporations feel that adding a Golden Parachute provision to the corporate bylaws, acts as a deterrent to unwanted takeover attempts, since these executive payments make it very expensive for a new owner to change the corporation 's management team (Kloeffler, D. 2012). CEOs have satisfied their obligations and generated value for shareholders during their tenure, some have increased company value by millions of dollars, and therefore these severance packages serve a purpose. In most cases, the profit and added value that a talented CEO can bring to a company, leverages the payout received at separation from the company. For example, Peter Cuneo who served as the CEO for
ENG 101
Professor James Lange
During the financial collapse of the economy that Americans have been dealing with for the past 5 years, Golden Parachutes have become a controversial topic. A Golden Parachute is defined as an agreement between an employee (in most cases an upper level executive) and a company that offers the employee specified additional benefits if the employee is terminated. In the past, most Golden Parachutes required that the termination was as a consequence of a merger or acquisition. But more recently the phrase has described executive severance packages unrelated to a change in the ownership of the company. This may include additional bonuses, stocks, severance pay, or other benefits. While high profile CEOs are justly compensated during their tenure and no further compensation is justified at separation, a Golden Parachute is not only a way of compensating a talented CEO for the millions of dollars in revenues they have brought to the company and its shareholders, but it can also protect a company from an unwanted takeover. Like most executive level severance agreements, a Golden Parachute is intended to provide the manager with a source of income while he or she searches for a new job. Some corporations feel that adding a Golden Parachute provision to the corporate bylaws, acts as a deterrent to unwanted takeover attempts, since these executive payments make it very expensive for a new owner to change the corporation 's management team (Kloeffler, D. 2012). CEOs have satisfied their obligations and generated value for shareholders during their tenure, some have increased company value by millions of dollars, and therefore these severance packages serve a purpose. In most cases, the profit and added value that a talented CEO can bring to a company, leverages the payout received at separation from the company. For example, Peter Cuneo who served as the CEO for
References: Becher, D.A et al (2012, January 4). Strategy+Business. Retrieved January 27, 2012, from strategy-business.com: http://www.strategy-business.com/article/re00218?gko=b507b Hall, P. L. (1998). An examination of stock returns to firms adopting golden parachutes under certain conditions. American Business Review, 16(1), 123-129. Retrieved from http://search.proquest.com/docview/216293967?accountid=34899 Kloeffler, D. (2012, January 27). ABC News. Retrieved January 3, 2013, from ABCNews.com: http://abcnews.go.com/blogs/business/2012/01/golden-parachutes-21-ceos-landed-100m-plus/ Naziri, J. (2012, May 10). MSN Money. Retrieved January 26, 2012, from MSN.com: http://money.msn.com/investing/10-ceos-who-turned-things-around Schepp, D. (2012, June 18). AOL . Retrieved January 22, 2013, from AOL Jobs: http://jobs.aol.com/articles/2012/06/18/average-ceo-pay-jumps-to-14-million- while-workers-barely-tread/ Shmanske, S., & Khan, N. (1995). Golden parachutes, information, and shareholder value. Atlantic Economic Journal, 23(1), 57-57. Retrieved from http://search.proquest.com/docview/214784751?accountid=34899