Twitter Takeover: What’s the $57.4 million ‘golden parachute’ that Parag Agarwal is entitled to?

Elon Musk has taken over Twitter. And among one of his first decisions was to fire the microblogging platform’s top executives – chief executive Parag Agarwal, chief financial officer Ned Segal, and legal affairs and policy chief Vijaya Gadde. However, Twitter’s famous three are not supposed to be walking out empty-handed.According to research firm Equilar, they are entitled to receive separation payouts worth $122 million (Rs 1,009 crore), reports news agency Reuters. Agrawal’s so-called “golden parachute” is valued at $57.4 million (Rs 475 crore), while Segal will get $44.5 (Rs 368 crore) million and Gadde $20 million (Rs 165 crore).Also read: From flamethrowers to challenging Putin to combat, why Elon Musk is the king of publicity stuntsWhat is a golden parachute?A golden parachute refers to a contract under which top executives of a company receive benefits, including large sums of money, in case they are let go after a merger or takeover. It is also called the “poison pill”, as it is a measure taken by a firm to shield itself against hostile acquisitions.The benefits could include stock options, cash bonuses, and severance pay. The executives continue to enjoy the benefits for a specific period and an executive bonus is pro-rated for the year of terminationThese benefits are called golden parachutes as they provide a soft landing for top executives who lose their jobs.According to Peer Fiss from the University of Southern California’s Marshall School of Business who wrote a study titled “How Golden Parachutes Unfolded”, the definition of the term has changed over the years.He told Business Insider the agreements emerged as protection for executives whose roles could be uncertain in case of a merger or acquisition. But today, he said, the term is used more loosely to mean any part of a compensation package payable upon an employee's exit from a firm, the report says.When was the term first coined?‘Golden parachute’ was used in 1961 when referring to the terms of employment by Charles Tillinghast Jr when he was appointed the chairman of Trans World Airlines (TWA). His contract mentioned a hefty severance package in case he lost his job. This was the time the airline’s creditors were trying to take control from the business tycoon Howard Huges, according to a report in TIME magazine.However, the parachute was never opened, the report said.When is the golden parachute deployed?The clause comes into action when a publicly traded company is sold. It can also be deployed when key executives of the company are terminated without cause or they resign for a good reason like “material diminution”, a substantial decrease in the scope of responsibilities.[caption id="attachment_11545221" align="alignnone" width="640"]

The three executives also hold 1.2 m shares, which are likely to be bought by Elon Musk. AP[/caption]Will Agarwal and the others receive the pay?Musk reportedly fired the three executives “with cause”. He accused them of misleading him and Twitter investors over the number of fake accounts on the platform, Reuters reports.Reports in the media say that the new management at Twitter may refuse to pay Agarwal, Segal, and Gadde their dues. The New York Times says that Musk fired the trio “with a cause” – he gave them due justification which could make the golden parachute agreement void.Rich Greenfield, an analyst at New York research firm LightShed, wrote in a tweet, “…@elonmusk fired top Twitter execs ‘for cause,’ preventing their unvested stock from vesting as part of a change of control.”

Other than the payouts, the three executives hold 1.2 million shares cumulatively, which are likely to be brought by Musk. This is a standard procedure followed in case of takeovers. These shares are estimated at a collective $65 million (Rs 538 crore).Who has received this benefit in the past? According to a report in TIME, one of the biggest golden parachutes was received by Micheal Ovitz who was the president of The Walt Disney Company. When he was fired in 1997 without a cause, he was given a $130 million severance package. Shareholders filed a suit claiming that Disney directors were reckless to hire him. But in 2006, Delaware Supreme Court ruled in favour of Ovitz.When Hank McKinnel was the CEO of Pfizer, the drug giant made a loss of $140 billion. He was given $188 million in severance which included $83 million in pension.James M Kilts was the CEO of The Gillette Company. He oversaw its acquisition by Procter and Gamble (P&G) in 2005 and received a golden parachute of $185 million.WeWork cofounder Adam Neumann reportedly received $1.7 billion for stepping down as the company's chairman after its biggest investor, SoftBank, took over the flailing company in October 2019, reports Business Insider.When Verizon acquired Yahoo in June 2017, Marissa Mayer who stepped down as CEO got $23 million.With inputs from agencies Read all the Latest News, Trending News, Cricket News, Bollywood News,India News and Entertainment News here. Follow us on Facebook, Twitter and Instagram.