Legal Definitions - golden handshake

Golden Handshake

A "golden handshake" refers to a substantial financial package and other benefits provided to an employee, typically when their employment is terminated, either voluntarily (such as early retirement) or involuntarily (such as dismissal or redundancy). The purpose is often to ease the transition for the employee or to incentivize their departure.

Here are some examples illustrating a golden handshake:

• Example 1: Early Retirement Incentive

  A multinational corporation's board of directors wishes to bring in fresh leadership for its aging CEO, who is still several years from mandatory retirement. To facilitate a smooth transition, they offer the CEO a package including three years' salary, a luxurious pension top-up, and continued use of a company car for a year, provided he agrees to step down within the next six months.

  This illustrates a golden handshake because it is a generous compensation package specifically designed to induce a long-serving employee to retire earlier than they might otherwise have planned, making their departure financially attractive.

• Example 2: Executive Dismissal During Restructuring

  During a major corporate restructuring, a large financial institution decides to eliminate the role of its Chief Operating Officer (COO). Despite the COO's long tenure and generally good performance, the company offers a severance agreement that includes two years' full salary, a significant bonus, accelerated vesting of all outstanding stock options, and comprehensive outplacement services, rather than simply terminating their contract with standard notice.

  This demonstrates a golden handshake as it represents a substantial and enhanced compensation package provided to a high-ranking employee upon their dismissal, going beyond basic legal requirements to ensure a smooth and potentially quiet exit.

• Example 3: Strategic Voluntary Departure

  A struggling retail chain's primary investor believes that a change in top management is crucial for the company's survival. They negotiate with the current President, offering a lump sum payment equivalent to 18 months' salary, a bonus tied to the company's previous year's performance, and a non-disparagement agreement, in exchange for the President's immediate resignation.

  This is an example of a golden handshake because it involves a generous financial incentive for a senior executive to voluntarily leave their position, facilitating a strategic shift or leadership change desired by the company's stakeholders.