Twitter bound to pay over $200mn as severance to 3 executives fired by Elon Musk: Report

Billionaire and Tesla CEO Elon Musk who now officially owns the micro-blogging site Twitter, fired three top executives on Thursday. Following Musk’s acquisition of Twitter for $44 billion, the new owner of Twitter fired Chief Executive Officer Parag Agrawal, Chief Financial Officer (CFO) Ned Segal and Legal Policy Head Vijaya Gadde.  

However, Twitter is now obligated to pay the three executives more than $204 million in severance. The payment will be covered by the “Golden Parachute” clause in Twitter’s merger with the billionaire’s X Holdings, reported Morningstar.  

What is the 'Golden Parachute' clause?

Golden parachutes are lucrative severance packages consisting of substantial benefits given to top executives under their contracts that compensate them when they are terminated.

The Golden Parachute for the three former Twitter executives was inked under the US Securities and Exchange Commission. Under the contract, Musk will have to give them more than $204 million. Under the "Golden Parachute Compensation" clause in the contract, the three top executives of the microblogging site would automatically vest stock worth $119.6 million as severance.

Moreover, the former Twitter executives own around 1.2 million shares in Twitter, reported Morningstar. The trio has a stake of $65 million in Twitter, $34.8 million of which is owned by Gadde. However, just like any other shareholder's stock, the stake of the trio will also be purchased by Musk.

Having a base pay of $600,000 in 2021, Gadde is set to walk away from Twitter with the biggest haul of around $74 million. Meanwhile, Agrawal had a base pay of $623,000 and Segal’s pay was also $600,000 in 2020. Under the Golden Parachute Clause, Agrawal and Segal are set to get roughly $65 million and $66 million, as severance respectively. Additionally, the executives are also entitled to a year's salary and health benefits under the aforementioned clause.

The acquisition of the microblogging site by the billionaire came after quite a controversial exchange of accusations during the initial phases of the deal with Musk alleging that Twitter hid the number of bots present on the platform, and announced his decision to step away from the deal. This was followed by Twitter alleging that the billionaire was trying to get out of the agreement due to his economic insecurities.