A golden parachute is a compensation agreement between a company and an employee, usually an upper executive, that guarantees significant financial benefits to the employee if their employment is terminated, often as a result of a merger or takeover. These benefits may include severance pay, cash bonuses, stock options, and other perks such as ongoing insurance and pension benefits. The purpose of a golden parachute is to provide a soft landing for employees of certain levels who lose their jobs.

Golden parachutes are often viewed as excessive due to the substantial payouts given to senior management after an acquisition, especially when other stakeholders during these acquisitions can be subject to layoffs. However, they can also preserve a firms value for all stakeholders and are set in place to protect CEOs during potential takeover situations.

Golden parachutes can be structured in different ways and can feature a range of potential perks for departing executives. These can include increased severance pay, a cash bonus, accelerated vesting of retirement benefits, and other benefits. However, they can also be controversial. Critics have pointed out that some golden parachutes are so lucrative that they make a notable dent in a companys finances, and that poorly performing or short-lived CEOs and other top executives can get paid large sums for little or poorly perceived work.

Golden parachutes are contracts with key executives and can be used as a type of anti-takeover measure, often collectively referred to as poison pills, taken by a firm to discourage an unwanted takeover attempt. Golden parachutes are thus named as such because they are intended to provide a soft landing for employees of certain levels who lose their jobs.