Pension parachute
Encyclopedia
A pension parachute is a form of poison pill
that prevents the raiding firm of a hostile takeover
from utilizing the pension assets to finance the acquisition. When the target firm is threatened by an acquirer, the pension plan assets are only available to benefit the pension plan participants.
In corporate governance, the pension parachute protects the surplus cash in the pension fund of the target from unfriendly acquirers; the funds remain the property of the plan’s participants in the target company.
The law firm of Kelley Drye & Warren claims to be the pioneers of the "pension parachute". Their first pension parachute was implemented for Union Carbide
, and its design was upheld in Union Carbide’s litigation with GAF.
Poison pill
A shareholder rights plan, colloquially known as a "poison pill", or simply "the pill" is a type of defensive tactic used by a corporation's board of directors against a takeover...
that prevents the raiding firm of a hostile takeover
Takeover
In business, a takeover is the purchase of one company by another . In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.- Friendly takeovers :Before a bidder makes an offer for another...
from utilizing the pension assets to finance the acquisition. When the target firm is threatened by an acquirer, the pension plan assets are only available to benefit the pension plan participants.
In corporate governance, the pension parachute protects the surplus cash in the pension fund of the target from unfriendly acquirers; the funds remain the property of the plan’s participants in the target company.
The law firm of Kelley Drye & Warren claims to be the pioneers of the "pension parachute". Their first pension parachute was implemented for Union Carbide
Union Carbide
Union Carbide Corporation is a wholly owned subsidiary of The Dow Chemical Company. It currently employs more than 2,400 people. Union Carbide primarily produces chemicals and polymers that undergo one or more further conversions by customers before reaching consumers. Some are high-volume...
, and its design was upheld in Union Carbide’s litigation with GAF.
See also
- EconomicsEconomicsEconomics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
- Mergers and AcquisitionsMergers and acquisitionsMergers and acquisitions refers to the aspect of corporate strategy, corporate finance and management dealing with the buying, selling, dividing and combining of different companies and similar entities that can help an enterprise grow rapidly in its sector or location of origin, or a new field or...
- MicroeconomicsMicroeconomicsMicroeconomics is a branch of economics that studies the behavior of how the individual modern household and firms make decisions to allocate limited resources. Typically, it applies to markets where goods or services are being bought and sold...
- TakeoverTakeoverIn business, a takeover is the purchase of one company by another . In the UK, the term refers to the acquisition of a public company whose shares are listed on a stock exchange, in contrast to the acquisition of a private company.- Friendly takeovers :Before a bidder makes an offer for another...
- Industrial organizationIndustrial organizationIndustrial organization is the field of economics that builds on the theory of the firm in examining the structure of, and boundaries between, firms and markets....