What's the difference between a golden handshake and a golden parachute?

By Chizoba Morah AAA
A:

A golden parachute is an agreement between a company and an employee that guarantees the employee certain benefits, like monetary compensation or stock options, if employment is terminated. A golden parachute agreement customarily is used as a lure to retain the upper executives of a company. Golden parachute agreements concern investors because company executives are highly compensated already and the agreements do not stipulate that golden parachute compensation be granted based on the successful performance of the executive.

A golden handshake is similar to a golden parachute in that it offers a severance package to an executive when he or she becomes unemployed from a company. While both terms describe severance packages given to executives upon termination of duties, a golden handshake goes further to include the severance packages granted executives upon retirement, too.

(For more on this topic, read Putting Management Under the Microscope, Evaluating a Company's Management and Lifting the Lid On CEO Compensation.)

This question was answered by Chizoba Morah.

RELATED FAQS

  1. How do I set a strike price for an option?

    Learn about the strike price of an option and how to set a strike price for call and put options depending on risk tolerance ...
  2. What are some of the limitations and drawbacks of using the cash conversion cycle ...

    Understand some of the limitations analysts must take into account when using the cash conversion cycle, or CCC, to evaluate ...
  3. What are the historical origins of business intelligence?

    Find out where the term "business intelligence" came from and how it evolved into the widely used concept in modern corporate ...
  4. What are the different groups involved in corporate governance?

    Learn about the challenges inherent to defining and executing corporate governance, and understand why different groups work ...
RELATED TERMS
  1. Catastrophe Equity Put (CatEPut)

    Catastrophe equity puts are used to ensure that insurance companies ...
  2. Open Trade Equity (OTE)

    Open trade equity (OTE) is the equity in an open futures contract.
  3. Back Pay

    The amount of salary and other benefits that an employee claims ...
  4. Constructive Discharge Claim

    An insurance claim made by an employee who has quit his or her ...
  5. Separation Of Powers

    An organizational structure in which responsibilities, authorities, ...
  6. Lilly Ledbetter Fair Pay Act

    A federal law designed to ensure equal pay for all workers, regardless ...

You May Also Like

Related Articles
  1. Options & Futures

    Options and Roth IRAs: Do's and Don'ts

  2. Options & Futures

    Trade Covered Calls On High Dividend ...

  3. Stock Analysis

    How Boeing is More Than Just a Coach-Class ...

  4. Mutual Funds & ETFs

    How do I invest or trade market indicators?

  5. Professionals

    What is Tim Cook's managerial style?

Trading Center