When an Australian CEO steps down, it can make as much news as their appointment—especially if a golden parachute is involved. These lucrative exit deals have returned to the spotlight in 2025, with new corporate governance debates and a fresh round of shareholder activism. But what exactly are golden parachutes, how do they work in Australia, and why do they matter to investors and employees?
What Is a Golden Parachute—and Why Are They Back in Focus?
A golden parachute is a contractual agreement that guarantees top executives substantial compensation—think multi-million dollar payouts, shares, or perks—if they lose their job due to a takeover, merger, or major corporate shake-up. Originating in the US in the 1980s, the concept has since found a strong foothold in Australia, particularly among ASX-listed companies.
In 2025, a handful of high-profile exits—like the recent leadership change at a major Australian bank—have put these deals under the microscope. Critics argue that golden parachutes can reward underperformance, while supporters claim they help attract and retain world-class talent during turbulent times.
How Do Golden Parachutes Work in Australia?
While golden parachutes are often negotiated quietly, their mechanics are straightforward:
- Trigger Events: Usually activated by mergers, takeovers, or redundancy not related to poor performance.
- Compensation: May include lump-sum cash, accelerated share vesting, superannuation top-ups, and other benefits.
- Disclosure: ASX rules and the Corporations Act 2001 require companies to disclose executive termination benefits above a certain threshold to shareholders.
Under current Australian law, payouts exceeding one year’s base salary (the ‘golden handshake’ limit) must be approved by shareholders. The Albanese government reaffirmed this policy in its 2024 review, aiming to curb excessive executive payouts while maintaining global competitiveness.
2025 Policy Updates and Corporate Governance Trends
The past year has seen increased scrutiny of golden parachutes as part of a broader push for corporate transparency and accountability. Here are some key developments in 2025:
- Increased Shareholder Power: The 2025 amendments to the Corporations Act have made it easier for shareholders to vote down excessive termination benefits. Proxy advisory firms are recommending ‘no’ votes more frequently when they spot what they see as unjustified exit packages.
- Focus on Performance: More ASX 200 companies now tie golden parachute eligibility to objective performance metrics, such as share price targets or sustainability goals, in response to investor pressure.
- Executive Talent War: Despite calls for restraint, demand for top-tier leadership in sectors like mining, banking, and tech is driving negotiations for even more robust parachutes—sometimes with creative retention clauses to keep key executives through periods of uncertainty.
Real-world example: In early 2025, a major Australian tech company’s outgoing CEO received a $6.2 million exit package, but only after meeting strict growth and ESG milestones, satisfying both the board and most shareholders. The deal sparked debate about what constitutes ‘fair’ reward for risk-taking and leadership in today’s volatile economy.
Impacts for Investors, Employees, and the Broader Economy
Golden parachutes don’t just matter to C-suite executives—they have knock-on effects for shareholders, ordinary employees, and the public’s perception of corporate Australia.
- Shareholder Value: Excessive payouts can dilute shareholder returns and create reputational risks. However, well-designed agreements may help companies secure strategic leadership during mergers or crises.
- Employee Morale: Large golden parachutes can cause friction within the broader workforce, especially if layoffs or pay freezes are happening elsewhere in the business.
- Regulatory Risk: With continued regulatory attention, boards are under pressure to justify these arrangements and ensure they align with long-term company performance and stakeholder interests.
The ongoing debate: Are golden parachutes a necessary tool in the corporate toolkit, or an outdated symbol of executive excess? In 2025, the answer depends on transparency, performance linkage, and whether shareholders are given a genuine say.
