Ancient alchemists tried to turn lead into gold. But here's an idea for a new, 21st century form of alchemy: Let's try turning golden parachutes into leaden parachutes. "Golden parachutes" are too often an illogical policy in normal times -- for example, when executives who run companies into the ground receive giant outgoing pay packages. A brief introduction to various parachutes is as below:
Golden Parachute
| An employment contract or agreement guaranteeing a key executive of a company substantial severance pay and other financial benefits in the event of job loss caused by the company's being sold or merged. Golden parachutes are generally defined as those that exceed the IRS threshold for excessive severance payments, meaning that they equal or exceed three times the recipient's average salary for the prior five years. Silver Parachute Like golden parachutes--which are received by the top executives in the corporation--silver parachutesinclude severance pay, stock options and bonuses but are offered to a larger number of employees.. |
Less prevalent than golden parachute plans, and slightly less lucrative, are so-called "silver" parachutes, which are sometimes awarded to executives below the top level. Siske says these plans typically pay out about 1.5 to 2.5 times the recipient's annual bonuses. Often the last isn't a significant issue, since for ex salary, bonus and benefits; although they sometimes do not cover executives at these level bonuses tend to account for a much smaller percentage of total compensation than they do for CEOs and other senior managers.
Tin parachute
Even less common than gold or silver parachutes are tin parachutes--severance plans that cover all of the employees of a company in the event it undergoes a change in control. The value of a tin parachute will vary significantly from company to company, says Siske, but will typically provide a severance payment linked to the recipients' years of service and/or their age, often with a cap, such as 1.5 times annual compensation.
Platinum Parachute
In some cases, severance packages awarded to senior executives have been termed "platinum parachutes" by the business media, both because of the enormous size of the payments and because they haven't always been tied to a change in control of the company. Some of the most prominent recipients have included former Mattel Inc. CEO Jill Barad, who benefited from a deal valued at $50 million when she left the toy maker amid mounting losses.
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