Management-Board Relationships, Takeover Risk, and the Adoption of Golden Parachutes

Abstract

This study compared the characteristics of the top management and boards of directors in large firms that have adopted golden parachutes for CEOs with those of an industry- and size-matched control group. The results indicated that firms that have experienced takeover threats are more likely to adopt golden parachutes than firms that have not. The findings also showed that firms adopting golden parachutes have relatively higher diffusion of stock ownership, higher tenure of the CEO vis-à-vis that of board members, and a higher proportion of external directors on their boards.