“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).
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.]
