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.

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.



comments powered by Disqus
Hot Definitions
  1. Market Capitalization

    The total dollar market value of all of a company's outstanding shares. Market capitalization is calculated by multiplying a company's shares outstanding by the current market price of one share. The investment community uses this figure to determine a company's size, as opposed to sales or total asset figures.
  2. Oil Reserves

    An estimate of the amount of crude oil located in a particular economic region. Oil reserves must have the potential of being extracted under current technological constraints. For example, if oil pools are located at unattainable depths, they would not be considered part of the nation's reserves.
  3. Joint Venture - JV

    A business arrangement in which two or more parties agree to pool their resources for the purpose of accomplishing a specific task. This task can be a new project or any other business activity. In a joint venture (JV), each of the participants is responsible for profits, losses and costs associated with it.
  4. Aggregate Risk

    The exposure of a bank, financial institution, or any type of major investor to foreign exchange contracts - both spot and forward - from a single counterparty or client. Aggregate risk in forex may also be defined as the total exposure of an entity to changes or fluctuations in currency rates.
  5. Organic Growth

    The growth rate that a company can achieve by increasing output and enhancing sales. This excludes any profits or growth acquired from takeovers, acquisitions or mergers. Takeovers, acquisitions and mergers do not bring about profits generated within the company, and are therefore not considered organic.
  6. Family Limited Partnership - FLP

    A type of partnership designed to centralize family business or investment accounts. FLPs pool together a family's assets into one single family-owned business partnership that family members own shares of. FLPs are frequently used as an estate tax minimization strategy, as shares in the FLP can be transferred between generations, at lower taxation rates than would be applied to the partnership's holdings.
Trading Center