This article written by Senior Associate Živko Simijonović and Associate Milić Perković outlines the legal basis, compensation, advantages, and disadvantages of Golden Parachutes, as well as the different types of parachutes that exist.
The primary purpose of Golden Parachutes is to protect top executives in case of a takeover and change of control (i.e. M&A) from job loss and financial hardship, by providing them with means included in the “exit packages” that they have a legal right to receive, giving them a means to “survive” the unintended leave of position. Golden Parachutes can also be used as a defense mechanism in case of a hostile takeover, as they are used to disincentivize acquiring companies through the expensive packages that would need to be paid out in order to complete the takeover.