Structuring more-effective executive severance contracts
Explains why executive severance contracts contingent on a change in control (i.e. golden parachutes) have developed and reviews previous relevant research. Develops a mathematical model of their effects on shareholder wealth and uses it to determine an optimal contract which aligns the interests of...
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Published in | Managerial finance Vol. 25; no. 10; pp. 13 - 21 |
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Main Authors | , , |
Format | Journal Article |
Language | English |
Published |
Patrington
MCB UP Ltd
1999
Emerald Group Publishing Limited |
Subjects | |
Online Access | Get full text |
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Summary: | Explains why executive severance contracts contingent on a change in control (i.e. golden parachutes) have developed and reviews previous relevant research. Develops a mathematical model of their effects on shareholder wealth and uses it to determine an optimal contract which aligns the interests of shareholders and managers (i.e. where marginal benefit to shareholders equals marginal cost of the contract). Points out that these contracts alone do not guarantee that managers will aim to maximize shareholders wealth: they should form only part of a package of compensation agreements to align their interests. |
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Bibliography: | ObjectType-Article-2 SourceType-Scholarly Journals-1 ObjectType-Feature-1 content type line 23 |
ISSN: | 0307-4358 1758-7743 |
DOI: | 10.1108/03074359910766190 |