Golden Handshakes: Separation Pay for Retired and Dismissed CEOs

No 41, SIFR Research Report Series from Institute for Financial Research

Abstract: 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.

Keywords: CEO turnover; severance pay (search for similar items in EconPapers)
JEL-codes: G34 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2006-02-15
New Economics Papers: this item is included in nep-acc and nep-bec
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (68)

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Journal Article: Golden handshakes: Separation pay for retired and dismissed CEOs (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:sifrwp:0041

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