Compensation - Part 12 - Compensation Incidental to Business Acquisitions

This is the so-called "Golden Parachute/Golden Handcuff" clause. Compensation that is paid or accrued incidental to business acquisitions are unallowable. Specifically FAR states that the following costs are unallowable.

1. Payments to employees under agreements in which they receive special compensation, in excess of the contractor's normal severance pay practice, if their employment terminates following a change in the management control over, or ownership of, the contractor or a substantial portion of its assets (Golden Parachutes).
2. Payments to employees under plans introduced in connection with a change (whether actual or prospective) in the management control over, or ownership of, the contractor or a substantial portion of its assets in which those employees receive special compensation, which is contingent upon the employee remaining with the contractor for a specified period of time (Golden Handcuffs).

These prohibitions were added in 1988.

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