Silver Parachute

AAA

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.

INVESTOPEDIA EXPLAINS '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.

RELATED TERMS
  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. Severance Pay

    The compensation that an employer provides to an employee who ...
  4. Golden Parachute

    Substantial benefits given to a top executive (or top executives) ...
  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 FAQS
  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 >>
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. Personal Finance

    Justifications For High CEO Pay

    CEOs tend to command sky-high salaries in America. Companies cite a number of reasons for this, but they don't always ring true.
  6. Brokers

    10 Most Famous Public Companies That Went Private

    Here’s a list of the most popular listed companies that went private in recent decades.
  7. Personal Finance

    Three Perks Business Should Give Their Employees

    Firms that treat their employees well have a competitive advantage over their rivals. Here are three important perks to give your employees.
  8. Taxes

    Are You Paying Too Much in Taxes?

    Overpaying taxes amounts to an interest-free loan to the government. Here are some ways to avoid that scenario.
  9. Investing Basics

    Will Nepotism Kill Wal-Mart?

    Wal-Mart recently appointed Greg Penner, grandson-in-law of its founder to the post of Board Chairman. Should investors be concerned about nepotism?
  10. Personal Finance

    6 Websites Where You Can Book a Private Jet

    These sites can help you get the flights and destinations you desire – and sometimes, even just a seat instead of a whole plane.

You May Also Like

Hot Definitions
  1. Hedging Transaction

    A type of transaction that limits investment risk with the use of derivatives, such as options and futures contracts. Hedging ...
  2. Bogey

    A buzzword that refers to a benchmark used to evaluate a fund's performance. The benchmark is an index that reflects the ...
  3. Xetra

    An all-electronic trading system based in Frankfurt, Germany. Launched in 1997 and operated by the Deutsche Börse, the Xetra ...
  4. Nuncupative Will

    A verbal will that must have two witnesses and can only deal with the distribution of personal property. A nuncupative will ...
  5. OsMA

    An abbreviation for Oscillator - Moving Average. OsMA is used in technical analysis to represent the variance between an ...
  6. Investopedia

    One of the best-known sources of financial information on the internet. Investopedia is a resource for investors, consumers ...
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!