Golden Handshakes: Separation Pay for Retired and Dismissed CEOs
This 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.
|Date of creation:||15 Feb 2006|
|Contact details of provider:|| Postal: Institute for Financial Research Drottninggatan 89, SE-113 60 Stockholm, Sweden|
Web page: http://www.sifr.org/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- C. Edward Fee, 2003. "Raids, Rewards, and Reputations in the Market for Managerial Talent," Review of Financial Studies, Society for Financial Studies, vol. 16(4), pages 1315-1357.
- Grinstein, Yaniv & Hribar, Paul, 2004. "CEO compensation and incentives: Evidence from M&A bonuses," Journal of Financial Economics, Elsevier, vol. 73(1), pages 119-143, July.
- Paul Gompers & Joy Ishii & Andrew Metrick, 2003.
"Corporate Governance and Equity Prices,"
The Quarterly Journal of Economics,
Oxford University Press, vol. 118(1), pages 107-156.
- Paul A. Gompers & Joy L. Ishii & Andrew Metrick, 2001. "Corporate Governance and Equity Prices," NBER Working Papers 8449, National Bureau of Economic Research, Inc.
- Paul A. Gompers & Joy L. Ishii & Andrew Metrick, 2002. "Corporate Governance and Equity Prices," Center for Financial Institutions Working Papers 02-32, Wharton School Center for Financial Institutions, University of Pennsylvania.
- Veall, Michael R & Zimmermann, Klaus F, 1994. "Goodness of Fit Measures in the Tobit Model," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 56(4), pages 485-499, November.
- Andres Almazan & Javier Suarez, 2003. "Entrenchment and Severance Pay in Optimal Governance Structures," Journal of Finance, American Finance Association, vol. 58(2), pages 519-548, 04.
- Lambert, Richard A. & Larcker, David F., 1985. "Golden parachutes, executive decision-making, and shareholder wealth," Journal of Accounting and Economics, Elsevier, vol. 7(1-3), pages 179-203, April.
- Mark R. Huson, 2001. "Internal Monitoring Mechanisms and CEO Turnover: A Long-Term Perspective," Journal of Finance, American Finance Association, vol. 56(6), pages 2265-2297, December.
- Inderst, Roman & Mueller, Holger M, 2005. "Keeping the Board in the Dark: CEO Compensation and Entrenchment," CEPR Discussion Papers 5315, C.E.P.R. Discussion Papers.
- Jay C. Hartzell, 2004. "What's In It for Me? CEOs Whose Firms Are Acquired," Review of Financial Studies, Society for Financial Studies, vol. 17(1), pages 37-61.
- Fama, Eugene F, 1980. "Agency Problems and the Theory of the Firm," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 288-307, April.
- Sundaram, Rangarajan K. & Yermack, David, 2006. "Pay Me Later: Inside Debt and Its Role in Managerial Compensation," SIFR Research Report Series 43, Institute for Financial Research.
- Benjamin E. Hermalin & Michael S. Weisbach, 1988. "The Determinants of Board Composition," RAND Journal of Economics, The RAND Corporation, vol. 19(4), pages 589-606, Winter.
- Agrawal, Anup & Knoeber, Charles R., 1998. "Managerial compensation and the threat of takeover," Journal of Financial Economics, Elsevier, vol. 47(2), pages 219-239, February.
- Lefanowicz, Craig E. & Robinson, John R. & Smith, Reed, 2000. "Golden parachutes and managerial incentives in corporate acquisitions: evidence from the 1980s and 1990s," Journal of Corporate Finance, Elsevier, vol. 6(2), pages 215-239, July.
- Denis, David J & Denis, Diane K, 1995. " Performance Changes Following Top Management Dismissals," Journal of Finance, American Finance Association, vol. 50(4), pages 1029-1057, September.
- Elazar Berkovitch & Ronen Israel & Yossef Spiegel, 2000. "Managerial Compensation and Capital Structure," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 9(4), pages 549-584, December. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:hhs:sifrwp:0041. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anki Helmer)
If references are entirely missing, you can add them using this form.