Golden Handcuffs

Golden handcuffs are a common retention technique for senior executives when their company is acquired - they only receive payment for their shares if they stay at the acquiring company.

What is a golden handcuff and what does it mean?

A golden handcuff is an agreement between the company and its executives that offers certain financial benefits in exchange for the executive’s continued loyalty to the company. It typically includes items such as stock options, cash bonuses, or other incentives that are offered in exchange for the executive agreeing to stay with the company for a specified period of time.

Who usually receives a golden handcuff agreement?

Golden handcuffs are typically offered to key executives or high-level employees who are considered essential to the company’s success. These individuals may have difficult-to-replace skills or knowledge, or they may be essential to the company’s operations in some other way.

Why do companies offer these agreements to executives?

Companies may offer golden handcuffs in order to attract and retain top talent. By offering these agreements, companies can ensure that their most important employees remain loyal and committed to the organization for a specified period of time.

What types of benefits may be included in the agreement?

The specific benefits that are offered as part of a golden handcuff agreement will vary depending on the company and individual executive. Common benefits include stock options, cash bonuses, extended healthcare coverage, and other financial incentives.

How are golden handcuffs financed and what is the impact of these agreements on shareholders?

The cost of a golden handcuff agreement will typically be borne by the company’s shareholders. In some cases, the financing for these agreements may come from the company’s general funds or from special insurance policies that have been purchased by the company. The impact on shareholders will depend on how much money is being spent on these agreements and how well the company is performing financially.

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