FAQ: Golden Parachute Payments Under Section 280G

Companies that are planning for a merger or acquisition have various issues to consider as they prepare for the transaction, one of the issues being golden parachutes.

Golden parachute payments are payments of compensation made to an individual when his or her company experiences a change in control. Congress added Section 280G to the Internal Revenue Code to discourage companies from paying golden parachutes. This was in response to critics who believed that golden parachutes, among other things, encouraged company management to proceed with a merger or acquisition that may not be in the best interest of shareholders so management could receive these large compensation payouts.