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. Takeover

    A corporate action where an acquiring company makes a bid for ...
  2. Acquisition

    A corporate action in which a company buys most, if not all, ...
  3. Golden Parachute

    Substantial benefits given to a top executive (or top executives) ...
  4. Merger

    The combining of two or more companies, generally by offering ...
  5. Shark Repellent

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

    The compensation that an employer provides to an employee who ...
Related Articles
  1. Mergers And Acquisitions: Understanding ...
    Fundamental Analysis

    Mergers And Acquisitions: Understanding ...

  2. The Layoff Payoff: A Severance Package
    Personal Finance

    The Layoff Payoff: A Severance Package

  3. How To Lay Off Staff
    Retirement

    How To Lay Off Staff

  4. Putting Management Under The Microscope
    Options & Futures

    Putting Management Under The Microscope

comments powered by Disqus
Hot Definitions
  1. Market Segmentation

    A marketing term referring to the aggregating of prospective buyers into groups (segments) that have common needs and will ...
  2. Effective Annual Interest Rate

    An investment's annual rate of interest when compounding occurs more often than once a year. Calculated as the following: ...
  3. Debit Spread

    Two options with different market prices that an investor trades on the same underlying security. The higher priced option ...
  4. Odious Debt

    Money borrowed by one country from another country and then misappropriated by national rulers. A nation's debt becomes odious ...
  5. Takeover

    A corporate action where an acquiring company makes a bid for an acquiree. If the target company is publicly traded, the ...
  6. Harvest Strategy

    A strategy in which investment in a particular line of business is reduced or eliminated because the revenue brought in by ...
Trading Center