A golden parachute is basically a payout clause written into the contracts of a company’s top executives in case their tenure is cut short. Amid the hostile takeovers and aggressive acquisitions that took place in the 1980s, golden parachutes were either a way to offer highly valued executives some form of insurance policy if the worst happened or a “poison pill” that could discourage takeovers because of the cost.
Today, however, high-level executives with enough bargaining power often negotiate a golden parachute even if they have to leave for other reasons — whether it’s public controversy, a change in the company’s direction or something else.
How do you negotiate a golden parachute?
First, you need to remember that a contract is a negotiation — and virtually everything can be negotiated. To get what you want, you should:
- Have a goal: You need to enter negotiations with both your top goal (the maximum you think you could possibly get) and your bottom line (the absolute minimum you’ll actually take) in mind. That way, you know where there’s room for negotiation.
- Don’t just think about dollars: Sure, you may want a portion of your salary, but don’t overlook paid COBRA, stock options, your yearly bonus and other side benefits that you can tap.
- Know your worth: Your industry experience, your business acumen, your connections, your influence and even your name all have value. The more the company wants out of you in the future, the more bargaining power you may have.
Finally, it does help to have experienced legal guidance throughout the contract negotiation process. Whether you’re asking a company to “sweeten the pot” to lure you into the position or you’re working out a severance agreement as you’re leaving, you don’t want to leave money on the table.
