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Golden Parachute

A golden parachute is an agreement made between high-ranking executives and the companies that employ them. Usually, these arrangements state that the executive will receive certain compensation (e.g., severance pay, bonuses, retirement benefits, or stock options) if the executive's job is terminated or when they leave the company. The use of golden parachutes is controversial; it can help attract top candidates but also unfairly reward individuals who resign or are fired due to scandals/negative behavior.

What Small and Midsize Businesses Need to Know About Golden Parachute

Golden parachutes are mainly used at larger corporations that can afford to offer significant benefits to their executives. Startups and SMBs are less likely to provide golden parachutes for two reasons: (1) startups need to conserve money to avoid running out of funding and (2) smaller companies suffer more harm (proportionally) from underperforming employees, making them reluctant to use arrangements such as golden parachutes that make it harder to separate from employees.

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