Golden Parachute

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Introduction

Back in the early 1980’s, a man named Gordon Gecko summed it up in 3 words. “Greed is good.” Golden Parachutes are a perfect example of greed in motion. Before the economic collapse of 2009, golden parachutes were not something that everyone knew about. The government bailout of the banks and the automotive industry brought them to the forefront of everyone mind. Golden Parachutes, by definition, are a clause in a contract of a CEO or other executive officer of a corporation, which is the company is acquired pays them a certain amount of money, or stock options. This payment is designed to counter the perverse incentive that a CEO has to not pursue being acquired by another corporation (because although being acquired might be good for the company and for the shareholders, it could cause the CEO to be fired). This payment is supposed to make the CEO impartial. These payments have become a leading source of contention for many businesses in light of the economic downfall. The sheer amount of some of this “golden parachutes” was enough to make the average person gasp in surprise, and that saying a lot being that most things no longer shock the America public. Golden Parachutes are yet another example of irresponsible corporate greed.

Golden Parachutes have been around for quite a long time. The earliest reference to a golden parachute was found in reference to Howard Hughes, Charles Tillinghast Jr., and his control of TWA in the 1960’s. The IRS has a specific section in the tax code relating them. Most of the details were kept a carefully guarded secret for obvious reasons. The sheer amount of some of these “golden parachutes” was enough to make the average person gasp in surprise, and that saying a lot being that most things no longer shock the America public. Some of these parachutes can be worth more that half a billion dollars after stock options. Most of the American public has found this to be a slap in the face. These large sum...
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