Golden Parachutes and the Business Judgment Rule: Toward a Proper Standard of Review
The term ''golden parachutes'' applies to special termination agreements that shelter executives from the effects of a corporate takeover. A typical golden parachute contains 3 components: 1. a change-of-control clause, 2. a termination clause, and 3. a compensation clause. Golde...
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| Veröffentlicht in: | The Yale law journal 1985-03, Vol.94 (4), p.909-928 |
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| container_title | The Yale law journal |
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| creator | Johnsen, Kenneth C. |
| description | The term ''golden parachutes'' applies to special termination agreements that shelter executives from the effects of a corporate takeover. A typical golden parachute contains 3 components: 1. a change-of-control clause, 2. a termination clause, and 3. a compensation clause. Golden parachutes may attract executives to industries with high displacement risks. Golden parachutes also reduce agency costs by shifting risk. The legality of golden parachutes is currently uncertain. Proposed is an approach for analyzing golden parachutes. The approach, which is based on the business judgment rule, is 2-tiered: 1. The court should determine if the entire compensation provided is so excessive that it could not be reasonably related to the executive's effort. 2. The court should determine if the agreement amounts to risk-shifting and if it is properly structured to achieve that goal. |
| doi_str_mv | 10.2307/796290 |
| format | Article |
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| fulltext | fulltext |
| identifier | ISSN: 0044-0094 |
| ispartof | The Yale law journal, 1985-03, Vol.94 (4), p.909-928 |
| issn | 0044-0094 1939-8611 |
| language | eng |
| recordid | cdi_proquest_miscellaneous_60817171 |
| source | PAIS Index; Worldwide Political Science Abstracts; HeinOnline Law Journal Library; Periodicals Index Online; JSTOR Archive Collection A-Z Listing |
| subjects | Acquisitions & mergers Advantages Benefits Business Business executives Business risks Business structures Compensation plans Corporate acquisitions Corporations Disadvantages Employment Executive Executive compensation Executives Golden parachute Golden parachutes Law Mergers & Acquisitions Parachutes Severance pay State court decisions Tax payments Tender offers Wages |
| title | Golden Parachutes and the Business Judgment Rule: Toward a Proper Standard of Review |
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