CandleFocus Glossary Editor
A golden handshake, also known as a golden parachute, is a type of termination agreement in which an executive or other employee is guaranteed a significant severance package when they leave their position involuntarily. These agreements, which include both compensation and other benefits such as accelerated vesting of stock options or a lump-sum cash payment, are typically negotiated ahead of time between the employer and the executive or other employee and pay out regardless of whether the separation is voluntary or involuntary.
The term "golden handshake" is most often used to describe an arrangement that is immensely generous and can cause dissatisfaction among other employees and the general public. While typically extended to senior level executives, some organizations are also known to dish out a much smaller version of the golden handshake to low-level employees.
These packages are designed to provide compensation and other benefits to the departing employee to help cushion the transition from employment. Depending on the arrangement, these packages may be offered only after a certain length of service or in the event of a layoff or plant closure. Many of these agreements also contain non-compete clauses to limit the employee’s ability to work elsewhere.
Because of the unpredictable nature of personnel changes, many employers view a golden handshake as an incentive to increase retention, particularly among senior leadership. However, not all golden handshakes come with no strings attached, and when they are awarded without strict criteria, they often create contention among employees and the public.
Golden handshakes have been the target of public criticism and government investigations in some countries. In the U.S., for example, the Internal Revenue Service has enacted length rules for executives that limit the amount of money that can be included in a golden handshake payment.
In conclusion, golden handshakes are often controversial and can cause upset among the general public. Generally, they are made to incentivize executive retention or provided in the event of involuntary separation. However, there are risks associated with them, and so employers should be extra mindful of the terms they include and the amounts they offer.
The term "golden handshake" is most often used to describe an arrangement that is immensely generous and can cause dissatisfaction among other employees and the general public. While typically extended to senior level executives, some organizations are also known to dish out a much smaller version of the golden handshake to low-level employees.
These packages are designed to provide compensation and other benefits to the departing employee to help cushion the transition from employment. Depending on the arrangement, these packages may be offered only after a certain length of service or in the event of a layoff or plant closure. Many of these agreements also contain non-compete clauses to limit the employee’s ability to work elsewhere.
Because of the unpredictable nature of personnel changes, many employers view a golden handshake as an incentive to increase retention, particularly among senior leadership. However, not all golden handshakes come with no strings attached, and when they are awarded without strict criteria, they often create contention among employees and the public.
Golden handshakes have been the target of public criticism and government investigations in some countries. In the U.S., for example, the Internal Revenue Service has enacted length rules for executives that limit the amount of money that can be included in a golden handshake payment.
In conclusion, golden handshakes are often controversial and can cause upset among the general public. Generally, they are made to incentivize executive retention or provided in the event of involuntary separation. However, there are risks associated with them, and so employers should be extra mindful of the terms they include and the amounts they offer.