Golden parachute contracts. Give key executives employment contracts under which the executives will receive large benefits if they are terminated without sufficient cause after a merger. Corporate takeovers often raise serious agency problems between stockholders and managers. A takeover at a large premium over the current market price of the firm’s stock is beneficial to stockholders. At the same time, the offer may be detrimental to managers because they may lose their jobs if the takeover is successful and the new owners replace them. Golden parachute contracts are used to encourage management to act in the interests of stockholders in any takeover attempt. LO1