golden parachute

noun

Definition of golden parachute 

: a generous severance agreement for a corporate executive in the event of a sudden dismissal (as because of a merger)

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The Gilded History of Golden Parachute

In 1981 an employee of a major company undergoing a corporate merger referred cynically to the huge severance packages given ejected executives as "golden parachutes." It isn't clear whether the employee actually coined the term, but it is well documented that both "golden" and "parachute" were already part of corporate parlance by that time. Since the 1960s, the business world had been using "golden handshake" for a compensatory package accompanying a termination or forced retirement. The image of the parachute, evoking a comfortable and painless landing, may have been inspired by the popular book about career change by Richard Bolles, titled What Color Is Your Parachute?

Examples of golden parachute in a Sentence

Recent Examples on the Web

Fortune‘s Jen Wieczner crunches the numbers and reports that Wynn may leave with a golden parachute of $300 million (!) Fortune • Chief HeR Officers. Valentina Zarya, Fortune, "Alexis Ohanian, Steve Wynn, Tesco: Broadsheet Feb. 8," 8 Feb. 2018 And Moonves would depart with a golden parachute likely worth north of $180 million. Paul Bond, The Hollywood Reporter, "Behind Leslie Moonves' Crusade to Save CBS From Viacom," 23 May 2018 This shakedown was legitimate, audacious, and meant to enrich struggling youth, not provide a golden parachute. Michael K. Mcintyre, cleveland.com, "Carol Rivchun retires from Youth Opportunities Unlimited with a "shakedown" party to benefit the kids": Michael K. McIntyre," 31 Mar. 2018 Other officials fail in their duties Steve Penny, CEO of USA Gymnastics, an organization under the umbrella of the U.S. Olympic Committee, resigned in March at the urging of the USA Gymnastics board with a $1 million golden parachute. Bill Livingston, cleveland.com, "USA Gymnastics sex abuse scandal scars women, shames institutions: Bill Livingston," 26 Jan. 2018 Executives often revise their change-in-control packages, sometimes referred to as golden parachutes, when there is takeover interest in their companies. Nathan Becker, WSJ, "Aetna’s Outgoing CEO Set to Reap About $500 Million if CVS Deal Closes," 5 Dec. 2017 Many people have millions of dollars invested in that very idea: according to an S.E.C. filing, Scripps CEO Ken Lowe is due to get a $91.6 million golden parachute from the company’s sale to Discovery Communications. Allen Salkin, HWD, "Did Bobby Flay Torpedo His Own Iron Chef Career? [Updated]," 25 Oct. 2017 Many people have millions of dollars invested in that very idea: according to an S.E.C. filing, Scripps CEO Ken Lowe is due to get a $91.6 million golden parachute from the company’s sale to Discovery Communications. vanityfair.com, "Did Bobby Flay Torpedo His Own Iron Chef Career? [Updated]," 25 Oct. 2017

These example sentences are selected automatically from various online news sources to reflect current usage of the word 'golden parachute.' Views expressed in the examples do not represent the opinion of Merriam-Webster or its editors. Send us feedback.

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First Known Use of golden parachute

1981, in the meaning defined above

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The first known use of golden parachute was in 1981

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More Definitions for golden parachute

golden parachute

noun

Financial Definition of golden parachute

What It Is

A golden parachute is an agreement between a company and an employee (usually a high level executive) that provides significant financial benefits to the employee upon termination.

How It Works

For example, upon a change in ownership or a shake-up in management, a golden parachute clause in an executive's employment contract might specify that the executive will be granted special severance pay, bonuses, stock options, or other non-cash benefits upon his departure from the organization.

[InvestingAnswers Feature: 10 Shortest CEO Tenures of All Time]

Theoretically, since the executive's own financial future is protected, he or she is free to make decisions about reorganizations, mergers or sell-offs that are in the long-term best interests of the company, even though such actions may lead to his or her dismissal.

Why It Matters

Golden parachutes are meant to help companies hire and retain top talent.  At the same time, golden parachutes have increased compensation costs, which can pose an obstacle to a transaction.

Average direct severance payments for golden parachutes in 2007-2008 were estimated at over $16 million per executive.  With bonuses, often irrespective of company performance, they can total up to two-and-a half times that amount.  As a result, golden parachutes are sometimes perceived as "poison pills." Transactions, if they involve the dismissal of top executives, can be perceived as too expensive even if they will benefit the company overall.

Source: Investing Answers

golden parachute

noun

English Language Learners Definition of golden parachute

: a large amount of money that a company pays to an executive who is being forced to leave the company

golden parachute

noun
gold·​en para·​chute

Legal Definition of golden parachute 

: an agreement providing for generous compensation to an executive upon dismissal

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