M & A Law Prof Blog

Editor: Brian JM Quinn
Boston College Law School

Wednesday, July 18, 2012

Tin parachutes at Chesapeake Energy

Cheseapeake Energy has not been a paragon of corporate governance these days.  So no one should be surprised by the fact that Reuters is now reporting that Chesapeake has instituted "tin parachutes" for approximately 1,6000 mid-level employees. A tin parachute is a program in which a large number of mid-level employees are given payaments upon a change of control as a takeover defense.  In the event there is a change of control and then employees with these tin parachutes are let go, then a large number of relatively small payments are triggered.  In Chesapeake's case the estimate cost would be $140 million. By raising the back end costs of restructing a takeover target, it becomes more expensive for potential acquirers.  Peoplesoft famously instituted a tin parachute while trying to fend off Oracle.  

According to Reuters, Chesapeake has not disclosed the tin-parachutes in its SEC filings.  That's strange.  I did a quick search and couldn't come up with any description, but I imagine the folks over at Footnoted.com can find it if it's been filed.  



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