Golden Parachute
A lucrative severance package guaranteed to executives upon job loss following a corporate takeover.
What is Golden Parachute?
A golden parachute is a contractual agreement that provides senior executives with substantial financial benefits — including large cash severance payments, accelerated equity vesting, and continued health and pension benefits — upon loss of employment following a change-of-control event such as a merger or acquisition. These provisions must be disclosed in proxy statements and are subject to an advisory shareholder vote (say-on-golden-parachute) under the Dodd-Frank Act. The IRS imposes an excise tax on golden parachute payments exceeding three times the executive's base salary. Critics argue they can reduce management's resistance to unfavorable deals; supporters contend they help attract and retain executive talent.
Example
When Twitter was acquired by Elon Musk in October 2022, former CEO Parag Agrawal received a golden parachute package estimated at approximately $42 million, including unvested equity that accelerated upon termination. Similar large change-of-control packages were received by Twitter's CFO and legal counsel.