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.



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