Silver Parachute


DEFINITION of 'Silver Parachute'

A form of severance paid to the employees of a company that is taken over by another company. Silver parachutes include severance pay, stock options and bonuses. Silver parachutes are generally extended to a large number of employees and often appear as clauses in hiring contracts that call for lucrative severance packages if an employee leaves the company, or, in particular, after a merger, acquisition or other change in corporate control.

BREAKING DOWN 'Silver Parachute'

Silver parachutes are similar to golden parachutes, which are received by the top executives in the corporation. A silver parachute is typically smaller, but more employees are eligible to receive one. Golden and silver parachutes are named such because they are intended to provide a "soft landing" for employees who lose their jobs either through corporate restructuring, mergers or other reasons. In certain cases, a silver parachute clause specifies that the benefits go into effect only if the company is taken over by another company, resulting in the employee losing his or her job.

  1. Acquisition

    A corporate action in which a company buys most, if not all, ...
  2. Takeover

    A corporate action where an acquiring company makes a bid for ...
  3. Shark Repellent

    Slang term for any one of a number of measures taken by a company ...
  4. Severance Pay

    The compensation that an employer provides to an employee who ...
  5. Severance Package

    A bundle of pay and benefits offered to an employee upon being ...
  6. Merger

    The combining of two or more companies, generally by offering ...
Related Articles
  1. Fundamental Analysis

    Mergers And Acquisitions: Understanding Takeovers

    In the dramatic world of M&As, battleground terms meld with bizarre metaphors to form the language of the game.
  2. Personal Finance

    The Layoff Payoff: A Severance Package

    If you must leave your job, go out fighting for the best benefits you can get.
  3. Retirement

    How To Lay Off Staff

    Firing employees isn't easy, but it is simple: be honest, be compassionate and be quick
  4. Options & Futures

    Putting Management Under The Microscope

    We tell you where to find the telltale signs of corporate misdeeds.
  5. Stock Analysis

    How UPS Plans to Benefit from Its Coyote Acquisition

    Understand the business models of UPS and Coyote Logistics. Learn about the top four ways in which UPS will benefit from the acquisition of Coyote Logistics.
  6. Retirement

    How Much Can You Contribute to Your 401(k)?

    Given the fairly high compensation limits on these retirement plans, most workers can pitch in more than they currently do.
  7. Professionals

    Prevent Employees From Hacking You Computer System

    Cyber security attacks from a current or ex-employee can cause a lot of pain. Here is how to avoid such attacks.
  8. Entrepreneurship

    Hire Your Kids at Your Small Business – Here's Why

    And how to make sure you do it the right way, following IRS guidelines.
  9. Investing News

    Office Depot and Staples Merger: What You Need to Know

    A major office-supply company merger is now in the works between Office Depot and Staples. First attempted 18 years ago, will this time be the charm?
  10. Forex Fundamentals

    How Foreign Exchange Affects Mergers and Acquisitions Deals

    Learn how foreign exchange rates can impact the flows of international merger and acquisition (M&A) transactions, and understand how deals can impact exchange rates.
  1. What's the difference between a golden handshake and a golden parachute?

    A golden parachute is an agreement between a company and an employee that guarantees the employee certain benefits, like ... Read Full Answer >>
  2. How long does it take to execute an M&A deal?

    Even the simplest merger and acquisition (M&A) deals are challenging. It takes a lot for two previously independent enterprises ... Read Full Answer >>
  3. What are some common accretive transactions?

    The term "accretive" is most often used in reference to mergers and acquisitions (M&A). It refers to a transaction that ... Read Full Answer >>
  4. What protections are in place for a whistleblower?

    Whistleblowers can play a critical role in ensuring the compliance, safety, honesty and legal fairness of governments and ... Read Full Answer >>
  5. What are some ways to make a distribution channel more efficient?

    While there are many ways to make a distribution channel more efficient, the three high-level ways to increase the efficiency ... Read Full Answer >>
  6. Does my employer's matching contribution count towards the maximum I can contribute ...

    Contributions to 401(k) plans come from employee salary deferral and employer match dollars. According to the IRS, employees ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Capitalization Rate

    The rate of return on a real estate investment property based on the income that the property is expected to generate.
  2. Gross Profit

    A company's total revenue (equivalent to total sales) minus the cost of goods sold. Gross profit is the profit a company ...
  3. Revenue

    The amount of money that a company actually receives during a specific period, including discounts and deductions for returned ...
  4. Normal Profit

    An economic condition occurring when the difference between a firm’s total revenue and total cost is equal to zero.
  5. Operating Cost

    Expenses associated with the maintenance and administration of a business on a day-to-day basis.
  6. Cost Of Funds

    The interest rate paid by financial institutions for the funds that they deploy in their business. The cost of funds is one ...
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!