Knowra Golden parachute Golden parachute A contractually agreed package of payments or benefits for executives if a company is acquired or undergoes another change in control. It can include cash, accelerated equity vesting, and continued benefits.
Change of control : A transaction or event that transfers control of a company to a new owner or governing party. The contract defines which control-changing events activate the package.
Golden handshake : A substantial financial package offered to an executive, often to encourage retirement or departure. Unlike a golden parachute, it need not be triggered by a change in corporate control.
Mergers and acquisitions : Transactions through which companies combine, acquire businesses, or transfer ownership and control. These transactions commonly create the control changes covered by parachute agreements.
Agency problem : A conflict that arises when an agent's interests diverge from those of the person or organization they represent. A parachute can soften executives' personal costs of a sale that may not benefit shareholders.
Single-trigger provision : A contract term that activates a benefit after one specified event, such as a change of control. Some agreements pay out as soon as control changes, without requiring job loss.
Golden handcuffs : Compensation arrangements designed to encourage employees to remain with an employer. These benefits reward continued service rather than protect executives through a takeover.
Executive compensation : The salary, incentives, benefits, and equity awards provided to senior corporate leaders. A golden parachute is a contingent component of executive compensation.
Executive turnover : The departure and replacement of senior leaders within an organization. Change-in-control payouts can influence whether executives leave after an acquisition.
Double-trigger provision : A contract term that activates a benefit only after two specified events occur. Many packages require both a change of control and a qualifying termination.
Poison pill : A corporate defense that makes an unwanted takeover more difficult or costly. It resists a takeover directly, while a parachute sets executive benefits if control changes.
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