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Definition of 'Golden Handshake'
A stipulation in an employment agreement which states that the employer will provide a significant severance package if the employee loses their job. A golden handshake is usually provided to top executives for loss of employment through layoffs, firing or even retirement. Payment can be made several ways, such as cash, or stock options.
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Investopedia explains 'Golden Handshake'
Sometimes these golden handshakes are for millions of dollars, which makes them a very important issue for investors to consider. For example in 1989, R.J. Reynolds Tobacco-Nabisco paid F. Ross Johnson over $53 million as part of a golden handshake clause severance compensation. Some contracts, along with compensation, include non-competition clauses that state that once employment is terminated the employee is not allowed to open a competing business for a specified period of time.
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