Golden Handshakes: Separation Pay for Retired and Dismissed CEOs
AbstractThis paper studies separation payments made when CEOs leave their firms. In a sample of 179 exiting Fortune 500 CEOs, more than half receive severance pay and the mean separation package is worth $5.4 million. The large majority of severance pay is awarded on a discretionary basis by the board of directors and not according to terms of an employment agreement. For the subset of exiting CEOs who are dismissed, separation pay generally conforms to theories related to bonding and damage control. Shareholders react negatively when separation agreements are disclosed, but only in cases of voluntary CEO turnover.
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Bibliographic InfoPaper provided by Institute for Financial Research in its series SIFR Research Report Series with number 41.
Length: 34 pages
Date of creation: 15 Feb 2006
Date of revision:
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Postal: Institute for Financial Research Drottninggatan 89, SE-113 60 Stockholm, Sweden
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More information through EDIRC
CEO turnover; severance pay;
Other versions of this item:
- Yermack, David, 2006. "Golden handshakes: Separation pay for retired and dismissed CEOs," Journal of Accounting and Economics, Elsevier, vol. 41(3), pages 237-256, September.
- G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
This paper has been announced in the following NEP Reports:
- NEP-ACC-2006-03-25 (Accounting & Auditing)
- NEP-ALL-2006-03-25 (All new papers)
- NEP-BEC-2006-03-25 (Business Economics)
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