‘Parachutes’ are on the rise

Seven
out of 10 of large US firms now provide "parachute" severance
arrangements for top executives following a change in control of their
organisation.

According
to a study of 350 large US corporations, 71 per cent had some type of parachute
arrangement in place during 2000.

This
proportion has increased since 1996 when 62.9 per cent of these organisations
provided their senior execs with another form of protection in the event of a
change of ownership.

The
most common severance programme for CEOs and other top executives, known as a
"golden parachute", typically pays three times salary plus bonus.

The
research by HR consultants William M Mercer shows that nearly 70 per cent of
organisations have parachute arrangements which are triggered following a
change in control and the subsequent termination of the executive’s employment.

Howard
Golden, a senior executive compensation consultant with William M Mercer, said,
"Parachutes clearly are beneficial to executives, but companies also view
them as necessary to ensure that the executive team is not distracted during a change
in control or other restructure situation."

By Ben Willmott

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