HR Word: Golden Handcuffs

02 Sep

Golden handcuffs definition

Golden handcuffs are contractual clauses that provide financial and non-financial benefits to executives that are forfeited if the executive leaves the company. Organisations use golden handcuffs to disincentivise executives from moving to competitors.

In some cases golden handcuffs may stipulate that executives have to give back bonuses and stock options should they leave, or if they leave within a defined period of time. Golden handcuffs may also provide stipulations around the executive’s behaviour i.e. they can’t perform any outside work that could result in a conflict of interest.

From an employer’s point of view, executives require significant investment in training so if the executive leaves before the company has made back its investment then the company is in effect losing money. Golden handcuffs are designed to protect against this possibility.

Other tools companies use to incentivise executives include golden handshakes and golden parachutes.

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Posted by on September 2, 2016 in HR Word of The Day


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