Golden Parachute and Golden Handshake are both types of financial arrangements or compensation packages provided to executives or key employees in certain circumstances, but they serve different purposes and are triggered under different circumstances.
- Golden Parachute:
Purpose: A Golden Parachute is designed to protect top executives or key employees in the event of a change in control or ownership of a company, such as during a merger or acquisition. The purpose is to ensure that these executives receive substantial financial benefits and job security even if they are terminated from their positions as a result of the corporate change.
Trigger: Golden Parachutes are activated specifically during change-in-control events or corporate takeovers.
Components: The package may include generous severance pay, accelerated vesting of stock options and equity awards, bonuses, continued benefits, and non-compete clauses.
Intent: The intention behind Golden Parachute is to incentivize key executives to support and facilitate a smooth transition of the company during the change in control, reassuring them that their financial interests will be protected.
- Golden Handshake:
Purpose: A Golden Handshake, on the other hand, is a financial arrangement provided to executives or key employees when they voluntarily leave a company or organization, typically through retirement or resignation.
Trigger: Golden Handshakes are activated when an executive voluntarily departs from the company.
Components: The package may include a significant severance payment, bonuses, stock options, and other benefits that are designed to provide a financial reward or cushion for the departing executive.
Intent: The intention behind a Golden Handshake is to incentivize executives to leave the company voluntarily or to reward their long-term service and contributions to the organization.
In summary, the main difference between Golden Parachutes and Golden Handshakes lies in their triggers and purposes. Golden Parachutes are activated during change-in-control events like mergers or acquisitions to protect executives from potential job loss and provide financial security. Golden Handshakes, on the other hand, are given to executives who voluntarily depart from the company as a reward for their service or to encourage their departure.
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