A golden parachute is an agreement between a company and an employee (usually upper executive) specifying that the employee will receive certain significant benefits if employment is terminated.

1. Golden parachute
Human Resource Management

2. Prepared By
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Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com

3. Golden Parachute
• A golden parachute is an
agreement between a
company and an employee
(usually upper executive)
specifying that the employee
will receive certain
significant benefits if
employment is terminated.

4. Golden Parachute
• Most definitions specify the
employment termination is as
a result of a merger or
takeover, also known as
"Change-in-control benefits",
but more recently the term
has been used to describe
perceived excessive CFO (and
other executives) severance
packages unrelated to change
in ownership (also known as a
golden handshake).

5. Golden Parachute
• The first use of the term
"golden parachute" is credited
to a 1961 attempt by creditors
to oust Howard Hughes from
control of Trans World Airlines.
The creditors provided Charles
C. Tillinghast Jr. an
employment contract that
included a clause that would
pay him money in the event
that he lost his job.

6. Golden Parachute
• The use of golden
parachutes expanded greatly
in the early 1980s in
response to the large
increase in the number of
takeovers and mergers.

7. Golden Parachute
• In Europe the highest "change-in-
control benefits" have been for
French executives, as of 2006
according to a study by the Hay
Group human resource
management firm. French
executives receive roughly the
double of their salary and bonus
in their golden parachute.

8. Golden Parachute
• News reference volume of the term
"golden parachute" spiked in late 2008
during the global economic recession, and
2008 US Presidential Debates. Despite the
poor economy, in the two years before
2012 a study by the professional services
firm Alvarez & Marsal found a 32%
increase in the value of "change-in-control
benefits" provided to US executives.

9. Golden Parachute
• In the 1980s, golden parachutes
prompted shareholder suits
challenging the parachutes' validity,
SEC "termination agreement
disclosure rules" in 1986, and
provisions in the Deficit Reduction
Act of 1984 aimed at limiting the size
of future parachutes with a special
tax on payouts that topped three
times annual pay.

10. Golden Parachute
• In the 1990s in the United States, some
government efforts were made to
diminish "change-in-control benefits". As
of 1996, Section 280G of the Internal
Revenue Code denies a corporation a
deduction for any excess "parachute
payment" made to a departing employee,
and Section 4999 imposes on the
recipient a nondeductible 20% excise tax,
in addition to regular income and Social
Security taxes.

11. Golden Parachute
• One study found golden
parachutes associated with an
increased likelihood of either
receiving an acquisition offer or
being acquired, a lower premium
(in share price) in the event of an
acquisition, and higher
(unconditional) expected
acquisition premiums.

12. Golden Parachute
• "Gratuitous" payments made to
CEOs on agreeing to have their
companies acquired (i.e.
payments made to CEOs by the
acquiring company not mandated
under the CEO's contract at the
time the company is acquired)
have been criticized.

13. Golden Parachute
• A study investigating acquirer-paid
sweeteners at 311 large-firm
acquisitions completed between
1995 and 1997 found that CEOs of
the acquired companies accept
lower acquisition premiums when
the acquirer promised them a
high-ranking managerial post after
the acquisition.

14. Golden Parachute
• On June 24, 2013, The Wall Street
Journal reported that McKesson
Chairman and CEO John
Hammergren's pension benefits of
$159 million had set a record for
"the largest pension on file for a
current executive of a public
company, and almost certainly the
largest ever in corporate America.

15. Golden Parachute
• A study in 2012 by GMI
Ratings, which tracks
executive pay, found that
60% of CEOs at S&P 500
companies have pensions,
and their value averages
$11.5 million.

16. Golden Parachute
• On June 29, 2013, The New York
Times reported on research
findings suggesting that "despite
years of public outcry against such
deals, multimillion-dollar
severance packages are still
common," and they continue to
become "more complex and
opaque."