Search

Article Information


Golden Parachutes: A Closer Look
Cochran, Philip L., and Steven L. Wartick
26/4  (Summer 1984): 111-125

This article describes various aspects related to the policy of golden parachutes (GP). A golden parachute provides "employment-contract provisions that guarantee them (usually top executives) cash settlements equal to several years' salaries if their company changes hands." For descriptive purposes such a definition suffices, but for analytical purposes this definition must be examined in more detail. Aside from one criterion-change of control-this definition does little to differentiate GPs from other types of severance pay. Distinguishing GPs on the basis of organizational position, size of compensation, or the vehicle of implementation seems fruitless. A factor which does distinguish GPs from traditional severance pay does exist, however, and that factor is voluntary, as well as involuntary, termination. If, after a change in control, an employee chooses to resign from the acquired company and thereby receives severance compensation, then the employee is, indeed, benefiting from a GP. Although involuntary termination is still a possibility under a GP agreement, it is the possibility of voluntary termination which distinguishes GPs from traditional severance pay.

 

California Management Review

Berkeley-Haas's Premier Management Journal

Published at the University of California for more than sixty years, California Management Review seeks to share knowledge that challenges convention and shows a better way of doing business.

Learn more
Follow Us