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What Is a Golden Parachute?

Definition: Golden Parachute

Golden parachutes soften an executive's fall when the company she leads is acquired and there's a change in ownership, leading to the dismissal of the particular executive. The parachute is a predetermined amount in excess of an executive's normal compensation and may be a combination of stock options, bonuses, and severance pay.

Most recently, the term has appeared in the news because the CEOs of Fannie Mae and Freddie Mac were refused their golden parachutes when their companies were taken over by federal regulators. The government has refused to pay out the fired executives, whose packages are estimated to total up to $25 million, and it's not clear what the CEOs may end up taking away. One thing is clear: The collapse of Fannie and Freddie has already impacted the CEOs' net worth — since March, Fannie's CEO's stake in the company went down to $683,000 from $23.7 million.

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Join The Conversation
thelorax thelorax 9 years
So many execs today live quarter to quarter - as long as they can show a short-term profit under their leadership and then hurry up and retire, they'll be gently floating along on their golden parachute and they don't care what the long term implications of their decisions are for the company.
ilanac13 ilanac13 9 years
wow - that has to hurt when you have an idea of what you're going to get if anything happens and you don't get but a small fraction of that. it's insane to think that the net worth could go from 23+ million to not even 1 million - but i guess that's what happens when things like this happen. the bubble burst. i wonder what compensation if any the CEOs of these latest banks will get now that they are out of a job. i think that it was partially do to their machismo that things waited until it was too late to do anything, so i'm guessing they will get nothing which is what the other employees are stuck with as well right?
bellaressa bellaressa 9 years
Thanks Savvy, I was wondering about this - I keep hearing it.
hithatsmybike hithatsmybike 9 years
the government is stealing from people? how unusual!
SugarKat SugarKat 9 years
Boohoo. Maybe they should've managed their company better and not had to have the Feds bail them out...the FEDS of all people. Sheesh.
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