Golden Parachutes, Board and Committee Composition, and Shareholder Wealth
Posted: 16 Oct 1998
Abstract
Takeover defense mechanisms have become common for many modern corporations. In this research, we examine one potential takeover defense mechanism, golden parachutes. In particular, the relationship between the board of directors and the board committees and the question of whether the parachutes are aligned with shareholder interests or are a means of entrenching management is studied. Results show that the composition of the board of directors' compensation committee influences the market's perceived outcome of golden parachute adoption. When insiders and affiliated outsiders dominate the board's compensation committee negative returns are more likely to occur than when independent outsiders control the committee.
JEL Classification: G34
Suggested Citation: Suggested Citation