A golden handshake is a financial arrangement in which an employer provides a substantial severance package to an employee who is leaving the company, typically a high-level executive or senior manager. The purpose of a golden handshake is to compensate the departing employee for their services and to facilitate a smooth transition or termination of their employment. Golden handshakes can include various components, such as cash payments, stock options, pension benefits, and other perks.
Golden handshakes are often provided in situations such as:
- Retirement: An executive or senior manager may receive a golden handshake as part of their retirement package, recognizing their contributions and achievements during their tenure with the company.
- Resignation or termination: In some cases, a golden handshake may be offered to an executive who is resigning or being terminated due to changes in company strategy, mergers and acquisitions, or other organizational restructuring. This arrangement can help the company avoid potential legal disputes or negative publicity related to the departure.
- Voluntary departure: A golden handshake may be used as an incentive for voluntary departure during times of downsizing or cost-cutting measures. By offering attractive severance packages, companies can encourage employees to leave voluntarily, reducing the need for layoffs or forced terminations.
While golden handshakes can help ease the departure process for both the employee and the company, they also have some potential drawbacks:
- High costs: Golden handshakes can be expensive for companies, particularly if they involve large cash payments or stock options. This can strain company finances and may be perceived negatively by shareholders or other stakeholders.
- Perception of unfairness: Other employees may perceive golden handshakes as unfair, especially if they feel that the departing executive is receiving a generous compensation package while the company is facing financial difficulties or implementing cost-cutting measures.
- Potential for abuse: In some cases, executives may negotiate golden handshakes that are overly generous or not in the best interest of the company, leading to concerns about corporate governance and accountability.
In summary, a golden handshake is a substantial severance package offered to a departing employee, typically an executive or senior manager, to facilitate a smooth transition or termination of their employment. While golden handshakes can help ease the departure process, they can also be costly and may lead to concerns about fairness and corporate governance.