These past few weeks we’ve heard about The Tonight Show debacle. Conan O’Brien and staff will make over $45M to walk away from the Tonight Show.
Coaches, athletes, and top executives sometimes work out an agreement with the company that will ensure they receive certain benefits if terminated. It’s known as The Golden Parachute.
According to TIME Magazine, Charles Tillinghast, Jr. was the first recipient of a golden parachute. When he took the helm of Trans World Airlines (TWA) in 1961, the airline’s creditors were trying to gain control of the company away from Howard Hughes. Tillinghast’s contract included a clause that would pay him money in the event that he lost his job.
Golden Parachutes have been very popular recently, but mostly because of the size of their payouts in a company with declining profits. Some call it — “Failing Upwards” or “Pay for Failure”. For example, Rick Wagoner departed General Motors with a pension of more than $20 million. GM lost over $30B. Eugene S. Khan former Chairman of Mays Department Stores received $10.94M after he left. During Khan’s tenure, Mays Department Stores lost 32% of theirstock price. After Khan left Mays Department Stores stock rose 16% the first day!
Do Golden Parachutes have a purpose? According to supporters it serves three purposes:
- Golden parachutes make it easier to hire and retain executives, especially in industries more prone to mergers.
- They help an executive to remain objective about the company during the takeover process.
- They dissuade takeover attempts by increasing the cost of a takeover, often part of a Poison Pill strategy,
Can YOU get a Golden Parachute?
If you are an executive or upper management, you can ask for a golden parachute in your contract. But the average employee usually doesn’t have this option. Tomorrow, I will discuss what the average employee should do when they leave their job.
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Jay Markunas is a Career Coach and Fortune 500 HR profesisonal. Along with his partner, Angela Loëb, will be hosting the session “Out of Your Comfort Zone” at the upcoming Career Connects Event on January 29th.
Through their company, Great Occupations, Jay & Angela help job seekers and career shifters by offering The Job Search Boot Camp webinar, Find a Career You Love tele-coaching event, career & job coaching services, and career-related products. Each 1st & 3rd Saturday, he & Angela host The Job Search Boot Camp Show – which also available on iTunes.
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