Top management tenure, corporate ownership structure and the magnitude of golden parachutes

It is found that golden parachute contracts involve higher levels of payment when top management is longer‐tenured, both in absolute number as well as relative to directors.

Abstract

This study investigates top management tenure, corporate ownership structure and board composition as predictors of different aspects of golden parachute magnitude: size and the number of executives covered. We found that golden parachute contracts involve higher levels of payment (in years' compensation) when top management is longer-tenured, both in absolute number as well as relative to directors. Golden parachutes are found to extend to fewer executives when non-management-owned blocks of stock are highly concentrated and when the level of management-owned stock is relatively low. The research points to the importance of examining ownership structure, board subcommittee composition and top executive tenure when researching decisions made by corporate boards.