GOLDEN PARACHUTE
golden parachute.An employment-contract provision that grants an upper-level executive
lucrative severance benefits — including long-term salary guarantees or bonuses — if control of
the company changes hands (as by a merger). Cf. TIN PARACHUTE. [Cases: Corporations
308(3). C.J.S. Corporations §§ 532–533, 536.]
“Key executives may be provided with significant employment contract clauses that are
triggered only by a change in the firm’s control through a sale, merger, acquisition, or takeover.
These contract clauses are commonly termed golden parachutes, and they generally provide that if
control over the employer’s business occurs and the new management terminates the executive,
additional compensation will be received…. Golden parachutes are useful in providing long-term
incentives for executives to enter industries in which takeover chances are above average.
Generally, golden parachutes do not violate public policy.” Kurt H. Decker & H. Thomas Felix II,
Drafting and Revising Employment Contracts § 3.33, at 84 (1991). [Blacks Law 8th]