Golden parachute.
In plain English
A golden parachute is severance triggered by a change in control, a contract that pays a senior executive a large sum if a sale or merger costs them their position. The package typically includes a cash multiple of salary and bonus, accelerated vesting of stock awards, and continued benefits. The stated purpose is to keep executives neutral when a buyout offer arrives, so they judge it for shareholders rather than for their own job security. Critics point out it can also reward the leaders of a company that had to be sold. Public companies must disclose these arrangements and put change-in-control pay to an advisory shareholder vote in a merger proxy.
01Why it matters
These payments come out of deal value that would otherwise reach shareholders, which is why the size and the triggers appear in the merger materials shareholders vote on.
02The math, step by step
A parachute of three times a $1 million salary plus a $2 million target bonus is $9 million in cash, before counting any acceleration of unvested stock.
Illustrative example. The amounts here are hypothetical, chosen to show how the math works, not real quoted rates or figures.
03What this is NOT
Regular severance pays out when someone is let go in the normal course, and it is usually modest and formula-based. A golden parachute triggers only on a change in control and is far larger. Some contracts pay on a single trigger, the deal alone, while others require a double trigger, the deal plus a termination.
04Receipts
Every figure on this page is sourced to a primary document. Tap to open the original.
Plain-English answers from our glossary. Receipts included. Never advice.
Educational tool. Answers come only from ClearMoneySchool's published glossary and are not advice. Why we never give advice