Golden Parachute .

• Golden Parachute

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Board of directors Election and removal

1 Furthermore, the director's contract of service will usually entitle him to compensation if he is removed, and

may often include a generous "golden parachute" which also acts

as a deterrent to removal.


Jack Welch Criticism

1 Countering the public uproar over excessive executive pay (including backdating stock options, golden

parachutes for nonperformance, and extravagant retirement packages),

Welch stated that CEO compensation should continue to be dictated by the

free market, without interference from government or other outside

agencies.https://store.theartofservice.com/the-golden-parachute-toolkit.html

Employee benefit United States

1 Normally, employer-provided benefits are tax-deductible to the employer and non-taxable to the employee. The exception to the general rule

includes certain executive benefits (e.g. golden handshake and golden

parachute plans).


Havas - Case against former directors

1 Havas alleged that the three directors had signed new

employment contracts during the takeover that gave them generous "golden parachutes" in the likely

event of their removal


Challenging the Chip - Stories of electronic workers suffering toxic exposures

1 There are problems of contamination by hi-tech manufacturing (of workers, air, land and water) from all around -- Silicon Valley in the

United States, Silicon Glen in Scotland, Silicon Island in Thailand, and Silicon Paddy in China. It contrasts the reality between the CEOs and

upper management drawing multimillion dollar salaries and 'golden parachutes' as

against the reality of the production workers living in packed dormitories and often facing

sweatshop conditions.


Sirius XM Radio - Executives

1 XM Satellite Radio executives who were not offered jobs in the new

combined company were assured golden parachute severance

packages that had been approved in 2007


Dodd–Frank Wall Street Reform and Consumer Protection Act - Subtitle E – Accountability and Executive Compensation

1 SHAREHOLDER APPROVAL OF EXECUTIVE COMPENSATION

Shareholders may disapprove any Golden Parachute compensation to executives via a non-binding vote


Boardroom - Election and removal

1 The director may require the company to circulate any representations that he wishes to make.In the United Kingdom,

see sections 303(2) and (3) of the Companies Act 1985 Furthermore, the

director's contract of service will usually entitle him to compensation if he is removed, and may often include a

generous golden parachute which also acts as a deterrent to removal.


Golden handshake

1 golden handshake is similar to, but more generous than a golden parachute because it

not only provides monetary compensation and/or stock options at the termination of

employment, it includes the same severance packages executives would get at retirement.[http://www.investopedia.com/ask/answers/0

9/difference-between-golden-handshake-parachute.asp#axzz1yqGBZeM6 What's the difference between a golden handshake and

a golden parachute?] investopedia.com


Golden handshake - Perverse incentives

1 (This is nevertheless an excellent bargain for the takeover artist, who

will tend to benefit from developing a reputation of being very generous to parting top executives). This is just

one example of some of the principal-agent / perverse incentive

issues involved with golden handshakes and golden parachutes.


Carly Fiorina - Hewlett-Packard

1 The company's stock jumped on news of Fiorina's departure. Under

the company's agreement with Fiorina, which was characterized as a golden parachute by some, she was paid slightly more than $20million in

severance.


Carly Fiorina - Politics

1 16, 2008.[http://www.huffingtonpost.com/2008/09/22/mccain-defends-fiorinas-

g_n_128277.html McCain Defends Fiorina's Golden Parachute] Oct


Golden parachute

1 also known as Change-in-control benefits.[http://www.deallawwire.com/2012/04/05/golden-

parachutes-on-the-rise-during-down-economy/ Golden parachutes on the rise during down economy] by Éric

L’Italien, Lawyer, Norton Rose Canada| Deal Law Wire| 5 April 2012 But more recently the term has been used to describe perceived excessive CEO (and other executives) severance

packages unrelated to change in ownership (also known as a Golden

handshake).[http://www.usatoday.com/money/companies/management/story/2011-11-07/100-million-dollar-chairmen/51116304/1 CEOs' golden parachute exit packages pass

$100 million] By Gary Strauss, USA TODAY 11/8/2011 The benefits may include severance pay, cash bonuses, stock

options, or other benefits.


Golden parachute - History

1 The first use of the term golden parachute is credited to a 1961 attempt by creditors to oust Howard Hughes from control of TWA airlines. The creditors provided Charles C. Tillinghast Jr. an employment contract that

included a clause that would pay him money in the event that he lost his

job.[http://www.time.com/time/specials/packages/article/0,28804,1848501_1848500_184

8418,00.html Biggest Golden Parachutes] time.com



1 The use of golden parachutes expanded greatly in the early 1980s in response to the large increase in

the number of takeovers and mergers.



1 In Europe the highest change-in-control benefits have been for French executives, as of 2006 according to a

study by the Hay Group human resource management firm. French

executives receive roughly the double of their salary and bonus in

their golden parachute.



1 News reference volume of the term golden parachute spiked in late 2008 during the global

economic recession, and United States presidential election debates, 2008|2008 US Presidential

Debates.[http://www.google.com/trends?q=Golden+Parachutectab=0geo=alldate=all Gross increase in golden parachute queries in

2008 ], Google Trends Despite the poor economy, in the two years before 2012 a study by the

professional services firm Alvarez Marsal found a 32% increase in the value of change-in-control

benefits provided to US executives



1 In the 1980s, golden parachutes prompted shareholder suits challenging the parachutes' validity, SEC termination agreement disclosure rules in 1986, and provisions in the Deficit Reduction Act of 1984

aimed at limiting the size of future parachuteshttp://www.jstor.org/stable/1228874?seq=9 see note 37, 38, 39 with a special tax on

payouts that topped three times annual pay.Mitchell Schnurman `CEO Pay Is A Real Problem, but This Isn't

the Time to Fix It` Fort Worth Star Telegram, September 28, 2008 In the 1990s in the United States, some government efforts were made to

diminish change-in-control benefits



1 Voters in Switzerland passed Swiss referendum against corporate Rip-offs of 2013|measures limiting CEO

pay and outlawing golden parachutes in Swiss referendum, 2013.


Golden parachute - Studies and reports

1 One study found golden parachutes associated with an increased likelihood of

either receiving an acquisition offer or being acquired, a lower premium (in share price) in

the event of an acquisition, and higher (unconditional) expected acquisition

premiums. It found firms adopting golden parachutes have lower market value

compared to assets of the company and that their value continues to decline during and

after adopting golden parachutes.


Golden parachute - Studies and reports

1 On June 29, 2013, The New York Times reported on research findings suggesting that despite years of public outcry against such deals, multimillion-dollar severance

packages are still common, and they continue to became more complex and

opaque.[http://www.nytimes.com/2013/06/30/business/golden-parachutes-are-still-very-

much-in-style.html?pagewanted=all_r=0 Golden Parachutes Are Still Very Much in

Style]https://store.theartofservice.com/the-golden-parachute-toolkit.html

Golden parachute - Support

1 Proponents of golden parachutes argue that the parachutes provide benefits to

stockholders:


Golden parachute - Opposition

1 * Benefits create perverse incentives.[http://www.jstor.org/stable/1228874

Golden Parachute, untangling the ripcords.] Richard P. Bress. Stanford

Law Review © 1987


UnitedHealth Group - Resignation of McGuire

1 Simultaneously, it was announced that he would be replaced as CEO by Stephen

Hemsley, who has served as President and COO and is a member of the board of

directors.http://news.yahoo.com/s/ap/20061015/ap_on_bi_ge/unitedhealth_ceo McGuire's exit compensation from UnitedHealth, expected to

be around $1.1 billion, would be the largest golden parachute in the history of corporate

America.http://www.chron.com/disp/story.mpl/headline/biz/4318193.html


Ashton-Tate - Sale to Borland (1991)

1 After giving the board a merger compensation package (including

individual bonuses of $250 thousand) and giving the management team

repriced options and golden parachutes, the board and Lyons

reinitiated discussions with Borland, but this time structured as a take-

over of Ashton-Tate with a significant premium over Ashton-Tate's current

market valuation.https://store.theartofservice.com/the-golden-parachute-toolkit.html

Perquisite - United States

1 Normally, employer-provided benefits are tax-deductible to the employer and non-taxable to the employee. The exception to the general rule includes certain corporate officer|

executive benefits (e.g. golden handshake and golden parachute

plans) or those that exceed federal or state tax-exemption standards.


Corporate raid

1 Corporate raids were particularly common in the 1970s and 1980s in the United States. By the end of the 1980s, management of many large

publicly traded corporations had adopted legal countermeasures

designed to thwart potential hostile takeovers and corporate raids, including poison pills, golden

parachutes, and increases in debt levels on the company's balance

sheet.


Corporate raid - Decline of the corporate raiders

1 By the end of the decade, management of many large publicly

traded corporations reacted negatively to the threat of potential hostile takeover or corporate raid

and pursued drastic defensive measures including poison pills,

golden parachutes and increasing debt levels on the company's

balance sheethttps://store.theartofservice.com/the-golden-parachute-toolkit.html

History of private equity and venture capital - Corporate raiders, hostile takeovers and greenmail

1 Management of many large publicly traded corporations reacted

negatively to the threat of potential hostile takeover or corporate raid



balance sheet


History of private equity and venture capital - RJR Nabisco and the Barbarians at the Gate

1 Additionally, many in RJR's board of directors had grown concerned at recent disclosures of Ross Johnson' unprecedented golden parachute

deal


Troubled Asset Relief Program - Timeline of changes to the initial program

1 To qualify for this program, the Treasury required participating institutions to meet certain criteria,

including: (1) ensuring that incentive compensation for senior executives does not encourage unnecessary and excessive risks that threaten the value of the financial

institution; (2) required clawback of any bonus or incentive compensation paid to a senior executive based on statements of earnings, gains or other criteria that are later proven to be materially inaccurate; (3) prohibition on

the financial institution from making any golden parachute payment to a senior executive based on the

Internal Revenue Code provision; and (4) agreement not to deduct for tax purposes executive compensation in

excess of $500,000 for each senior executive


Troubled Asset Relief Program - Participation criteria

1 In addition, the bill limits 'golden parachutes' and requires that unearned bonuses be

returned


Troubled Asset Relief Program - Protection of taxpayer investment

1 ###'Companies who sell more than $300 million in assets through an

auction process' are prohibited from signing new golden parachute

contracts (employment contracts that provide for large payments upon

termination) with any future executives. It will also place a $500,000 limit on annual tax

deductions for payment of each executive, as well as a deduction

limit on severance benefits for any golden parachutes already in place.


Troubled Asset Relief Program - Protection of taxpayer investment

1 These standards will require the companies to eliminate compensation structures that

encourage unnecessary and excessive risk-taking by executives, provide for claw-back

(forced repayment of bonuses in the event of a post-payment determination that the

bonuses were paid on the basis of false data) of bonuses already paid to senior executives based on financial statements later proven to

be inaccurate, and prohibit payment of previously established golden parachutes.


UK company law - Mergers and acquisitions

1 1989) Moreover, Delaware directors can often only be removed for a good

reason (fought out in court) with a board classified into directors a third

of whom will be removable in any given year.See DGCL §141(k) This

makes hostile takeovers very difficult, unless a bidder promises the

incumbent board large golden parachutes in return for their consent


Say on pay - UK law

1 no golden parachutes), except, under section 220, in respect of damages

for existing obligations and pensions.


Say on pay - US law

1 Additionally, it had a provision for a shareholder vote on

golden parachutes


Private equity in the 1980s - Corporate raiders, hostile takeovers and greenmail

1 Management of many large publicly traded corporations reacted

negatively to the threat of potential hostile takeover or corporate raid



balance sheet


CalPERS - Shareholder activism emphasized under Dale Hanson's leadership

1 *Called for reform in executive compensation, especially Golden

Parachutes, in 2004.Chan, Gilbert. [http://www.equilar.com/NewsArticles/111604_SacBee.pdf CalPERS wants

to curb soaring executive pay.] Sacramento Bee, November 16,

2004.


RJR Nabisco - The leveraged buyout

1 Additionally, many in RJR's board of directors had grown concerned at recent disclosures of Johnson's

unprecedented golden parachute deal


Sweetheart contract

1 A 'sweetheart deal' or 'sweetheart contract' is an abnormally favorable contractual

arrangement. A particularly lucrative golden parachute could be an example of a type of

sweetheart deal, were it not in the best interests of the stockholders. It particularly applies to

government officials and uses of the term involve hints at the presence of corruption. Such

deals may also put a third party at a distinct disadvantage, (e.g. price fixing between oil

companies or mobility services).


Emergency Economic Stabilization Act of 2008 - Executive pay limits

1 Also, the company is prohibited from making golden parachute payments to a senior

executive



1 If the Treasury purchases assets via auction, and that purchase exceeds $300 million, any new employment contract for a senior officer may not include a golden parachute provision

in the case of involuntary termination, bankruptcy filing,

insolvency, or receivership. This prohibition only applies to future

contracts; golden parachutes already in place will remain unaffected.



1 In either scenario, no limits are placed on executive salary, and

existing golden parachutes will not be altered.Abrams, Paul.

[http://www.huffingtonpost.com/paul-abrams/weak-pathetic-executive-c_b_130166.html Weak, Pathetic

Executive Compensation Limitations], Huffington Post,

September 29, 2008.https://store.theartofservice.com/the-golden-parachute-toolkit.html

Tax information reporting - Information returns

1 Form 1099-MISC reports a variety of payments including renting|rent, crop insurance proceeds, so-called golden

parachute payments, royalties, payments for medical treatment, income from fish that are sold for cash, and payments for business

services


Chainsaw Al - Career

1 He sold Scott Paper to Kimberly-Clark in 1995 for $7.8 billion and walked away with a $100 million

golden parachute.


Charles C. Tillinghast Jr. - Biography

1 In 1957 he joined Bendix Corporation|Bendix Corporation, becoming director of its foreign

operations. He was a vice president at Bendix in 1961 when he was hired as president and CEO of TWA in a deal sponsored by creditors seeking to oust Howard Hughes from control of the airline. Because control of the airline

was in litigation, Tillinghast received an employment contract, dubbed a “golden

parachute”, the first known use of that term. He served as chairman until 1976.


Executive pay in the United States - Severance/buyout/retirement compensation

1 From 2000 to 2011, the top 21 walk-away packages given to CEOs were worth more

than $100 million each and came to a total of almost $4

billion.[http://origin.library.constantcontact.com/download/get/file/1102561686275-69/

GMI_GoldenParachutes_012012.pdf Twenty-One U.S. CEOs with Golden Parachutes of

More Than $100 Million]|, GMI, January 2012 |By Paul Hodgson, Senior Research Associate,

and Greg Ruel, Research Associate


Executive pay in the United States - Severance pay

1 Bloomberg quotes one corporate governance researcherPaul Hodgson, a director at BHJ

Partners in Portland, Maine [http://www.bloomberg.com/news/2013-06-

06/golden-parachutes-of-100-million-for-fired-ceos-outlive-outrage.html Golden Parachutes

of $100 Million for Fired CEOs Outlive Outrage] as complaining, “If you have a

safety net of this type of gargantuan size, it starts to undermine the CEO’s desire to build

long-term value for shareholders


Executive pay in the United States - Connection of power and pay

1 O'Reilly III and Ike Chandratat, Golden Parachutes, CEOs and the

Exercise of Social Influence, Administrative Science Quarterly 35

(1990): 592–593Martin J


Executive pay in the United States - Connection of power and pay

1 The more outside directors are appointed by a CEO, the higher that

CEO's pay and more likely they are to be given a golden parachutes.John E.

Core, Robert W. Holthausen and David F. Larcker Corporate

Governance, Chief Executive Compensation and Firm Performance.

Journal of Financial Economics 51(1999) 372–373


Executive pay in the United States - End of the Great Compression

1 Around 1983 congress passed a law that put a special tax on golden parachutes payouts in excess of

three times annual pay


Executive pay in the United States - Transparency

1 But like the regulation of golden parachutes, this new rule had

unintended consequences. According to at least one source, the

requirement did nothing to lessen executive pay, in part because the disclosure made it easier for top

executives to shop around for higher paying positions.


Executive pay in the United States - Proposals

1 These include government regulations such as say-on-pay vote requirements, restrictions on tax gross-ups (paying not just compensation but also

the tax bill for the compensation), golden parachute compensation and other severance

payments, stricter standards for independence of compensation committees and their advisers, and

clawbacks (recovery of compensation for unearned performance-based

pay).[http://www.saul.com/media/article/1175_pdf_2109.pdf Executive Compensation: Under Fire

and What's to Come] By: Katayun I


Causes of the Great Recession - Mortgage compensation model, executive pay and bonuses

1 Bank CEO Jamie Dimon argued: Rewards have to track real, sustained, risk-adjusted performance. Golden parachutes, special contracts, and unreasonable perks must

disappear. There must be a relentless focus on risk management that starts at the top of the organization and permeates down to the

entire firm. This should be business-as-usual, but at too many places, it wasn't.

[http://online.wsj.com/article/SB124605726587563517.html WSJ - JPM CEO Jamie Dimon]


Swiss referendum, 2013 - March referendums

1 The first three national referendums in 2013 were held on 3 March, with voters asked whether they

supported a federal order on family policy, an amendment to the federal law on spatial planning,

[http://electionguide.org/election.php?ID=2336 Election Profile] IFES and a Federal popular

initiative|popular initiative on executive pay that would introduce binding shareholder votes on salary

levels,[http://www.pirc.co.uk/news/swiss-edge-towards-binding-vote Swiss edge towards binding

vote] PIRC as well as banning golden hellos for new employees and golden parachutes for departing

staff


Burning Man - Transition to a non-profit organization

1 An earlier agreement stated that each member of the LLC would only receive sole compensation for many years of service, a golden parachute

of $20,000


Gold (color) - Business

1 * In human resources, a business executive or professional who has an

employment contract that gives them a generous severance pay is said to have a golden parachute.


National Education Association - Controversy

1 The local union paid him a golden parachute valued at $140,000


New York Mercantile Exchange - Sell-off

1 The final executive management of NYMEX decided to sell it off in pieces, take golden parachute buyouts, and

leave


Dexia - Axel Miller

1 After his forced departure in October 2008, CEO Axel Miller was contractually entitled to a 'golden parachute' of €3.7million. This provoked protest from the French president

Nicolas Sarkozy, and Miller subsequently renounced his bonus, leaving the matter to the wisdom of the Board of Directors. The board eventually decided to pay him one year's salary (€825,000), thus ignoring

Sarkozy's remarks.


Florida Medical Marijuana Initiative (2014) - 2014 gubernatorial politics

1 Polls also have consistently shown that Florida voters do not trust Rick

Scott, partly due to his well-publicized 1995 trial for Medicare fraud, in which he pled the Fifth

Amendment to the United States Constitution 75 times in a deposition prior to being acquitted and given a

golden parachute when he was forced to leave his then-company,

Columbia/HCA.https://store.theartofservice.com/the-golden-parachute-toolkit.html

Michele Bachmann - Financial sector

1 She voted against the first proposed $700billion bailout of financial institutions,

which failed to pass 205–228. She also advocated breaking up Fannie Mae and

Freddie Mac and barring executives from excessive compensation or golden

parachutes. However, she also advocated a plan that would suspend mark-to-market

accounting rules and supported suspending the capital gains tax.


Bell v. Lever Brothers Ltd. - Facts

1 A similar golden parachute of £20,000

was given to Mr Snelling


2008–2012 Spanish financial crisis - Spanish banking system

1 Golden parachutes have been prevalent: it has been speculated that this was because of fear that laid-off senior members would talk

about the rampant malpractice inside the sector


English contract law - Unconscionability

1 So long as a threat is just one of the reasons a person enters an agreement,

even if not the main reason, the agreement may be avoided.See Barton v Armstrong

[1973] [http://www.bailii.org/uk/cases/UKPC/1973/2

.html UKPC 2], [1976] AC 104, where Mr Armstrong tried to strong-arm Mr Barton

into paying him a large golden parachute to exit a business by getting his goons to make death threats to Barton's family


Admirals Club - Merger with US Airways

1 Bankruptcy judge Sean Lane approved the merger in March while refusing to approve American CEO Tom Horton's $20 million golden

parachute as being inappropriate.[http://abcnews.go.com/blogs/business/2013/03/judge-nixes-20m-airline-

ceo-payout/ Judge Nixes $20M Airline CEO Payout - ABC News]


Anne Lauvergeon - Leadership in nuclear power

1 In September 2002, the daily economic newspaper Les Échos (France)|Les Échos uncovered a report from the French court of

auditors, citing her compensation (salary of €305,000 with bonus of

€122,000) and golden parachute of two years' wages.


SouthTrust - Malone's golden parachute

1 When the merger was completed, Malone's $100 million Golden

Parachute went into effect. The New York Times put this figure closer to

$135 million. Malone has stated that somewhere around 40% of that total

will go into a trust for the families affected by the SouthTrust-Wachovia merger, although nothing further has

been mentioned yet regarding this matter.


Kohlberg Kravis Roberts - Barbarians at the Gate – KKR's leveraged buyout of RJR Nabisco

1 Additionally, many in RJR's board of directors had grown concerned at recent disclosures of Ross Johnson' unprecedented golden parachute

deal.[http://query.nytimes.com/gst/fullpage.html?

res=940DE4DF133CF936A35752C1A96E948260 Nabisco Executives to Take Huge Gains in Their Buyout]


Agence Havas - Case against former directors

1 Havas alleged that the three directors had signed new

employment contracts during the takeover that gave them generous

golden parachutes in the likely event of their removal


Sanjay Jha - Compensation

1 The cash portion is equal to three times Jha’s base salary and bonus.

[http://www.firstpost.com/business/motorola-ceo-jha-to-get-66mn-golden-parachute-in-google-deal-84578.html

Golden Parachute for Sanjay K


Effects of the 2008–2010 automotive industry crisis on the United States - Congressional bailout bill

1 The bill proposed the appointment of a 'car czar' to oversee automakers'

restructuring efforts, and restrictions on executive bonuses, golden

parachute packages and required automakers to sell or divest

themselves of any privately owned or leased aircraft.


PBA Tour - 2009–10 World Series of Bowling

1 (It was awarded to 24-time PBA titleist Brian Voss.) Following the

2009–10 season, the Golden Parachute exemption will come only

from the previous year's crop of players who lose their exemption due

to points.


United Kingdom Parliamentary expenses scandal - Labour backbenchers

1 He was subsequently barred from receiving his MP's resettlement

grant, after being censured for his claims on a second

home.[http://www.telegraph.co.uk/news/politics/8091941/Golden-

parachute-deals-net-MPs-10.3m.html Golden parachute deals net MPs

£10.3m]


Hugh Culverhouse - Lawsuits over the Culverhouse estate

1 Story, paid themselves $4.35 million in bonuses for arranging the

Buccaneers' sale, sums far in excess of what Culverhouse himself had

specified, and that they paid Story a sum that was comparable to the

salary of a Fortune 500 executive for managing the estate and included a

10-year golden parachute clause


Joe Chappelle - CSI: Miami

1 Chappelle directed the pilot episode Golden Parachute for the CBS crime drama CSI:

Miami. The series was a spin-off from the successful procedural CSI: Crime Scene

Investigation. Chappelle became a producer and director for the CSI: Miami (season 1)|first season once the series was picked up. Chappelle directed a further four episodes for the first season; Losing Face, Evidence

of Things Unseen, Double Cap and the season finale Body Count.


Kiss Kiss, Bang Bangalore - Plot

1 Burns then fires all the workers; however, this makes the workers delighted due to the various firing

clauses Homer has written into their contracts (Golden parachutes for all!)


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