Salary FYI

Golden Parachute

Employment

A substantial compensation package guaranteed to a senior executive if they are terminated — especially during a merger, acquisition, or change of control.

## Golden Parachute

A golden parachute is a clause in an executive's contract that provides significant compensation if they lose their position due to a change of ownership or control.

### Typical Components

| Component | Typical Terms |
|-----------|---------------|
| Cash severance | 2–3× annual salary + bonus |
| Equity acceleration | All unvested options/RSUs vest immediately |
| Benefits continuation | 1–3 years of health insurance |
| Excise tax gross-up | Company covers the 20% excise tax |
| Consulting agreement | Continued payments post-departure |

### Tax Rules (US)

Section 280G imposes a 20% excise tax on 'excess parachute payments' — generally payments exceeding 3× the executive's average compensation over the prior 5 years. Some companies gross up to cover this; others cap payments at the safe harbor (2.99×).

### Controversy

Golden parachutes are controversial: supporters argue they reduce executive resistance to beneficial mergers; critics see them as excessive executive enrichment at shareholder expense.