Golden Handcuffs – Definition

Cite this article as:"Golden Handcuffs – Definition," in The Business Professor, updated March 26, 2019, last accessed August 12, 2020, https://thebusinessprofessor.com/lesson/golden-handcuffs-definition/.

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Golden Handcuffs Definition

Perks and financial incentives offered to employees to stay with a firm are referred to as Golden Handcuffs. Golden Handcuffs increase employee retention rates by locking in the duration of employee stay with a firm. Golden Handcuffs are common in industries with high attrition rates and frequent talent poaching. Talented software developers in the IT industry and skilled designers in the fashion space are prime examples of employees who are most likely to be chained to brands with Golden Handcuffs.

A Little More on What are Golden Handcuffs

Hiring and training employees requires a lot of resource expenditure. Hence, it is in the interest of companies to retain their employees for longer durations as they are considered assets that the company has invested in. The opportunity cost of hiring and training new employees is much higher than investing in keeping existing employees happy and loyal to the company.

Examples of Golden Handcuffs

Employers might use various tactics like offering employee stock options with yearly vesting periods that finish vesting over a few years, keeping employees tethered to the company. Conditional hiring practices also abound that prohibit employees from quitting until a certain time period has lapsed. Contractual bonuses that include a time duration element is another example of using Golden Handcuffs.

While they appear to be lucrative deals on the surface, Golden Handcuffs are designed to stop employees from moving on to bigger and better opportunities, proving very restrictive in the long run.

References for Golden Handcuffs

Academic Research on Golden Handcuffs

Golden handshakes: Separation pay for retired and dismissed CEOs, Yermack, D. (2006). Journal of Accounting and Economics, 41(3), 237-256. This paper examines the basis on which severance packages are offered to retiring CEOs with data from 170 Fortune 500 companies.

Golden handshakes: Rewards for CEOs who leave, Yermack, D. (2004). This paper studies the severance packages offered to departing CEOs in excess of $4.5 million and separation agreements.

Downsizing the civil service in developing countries: golden handshakes or smiling farewells?, Peters, L. (1998). Public Administration and Development: The International Journal of Management Research and Practice, 18(4), 381-386. This paper looks at the effect of Golden Handshakes in developing economies and suggests civil services reforms.

Golden handshakes and golden parachutes: severance packages for corporate executives, Nussbaum, M. (2005).(Doctoral dissertation, University of British Columbia). This paper looks at the severance packages for corporate executives and analyses the implications.

Golden handshakes: pay for failure and executive dismissals, Gulamhusein, K. (2005). This paper studies data from 179 Fortune 500 firms CEO exits to learn about the factors that influence the severance pay.

Early Retirement Programs: Golden Handshakes or Gilded Shoves, Colosi, M. L., Rosen, P. B., & Herrin, S. J. (1988). Labor Law Journal, 39(12), 795. This paper takes a critical look at Golden Handshakes and raises the question of whether these severance packages are meant as a thank you or a shove in the back.

Taxes on severance pay, corporate governance and golden handshakes, Llense, F. (2009). This paper analyses the rise of Golden Handshakes in the European industries in the last decade and studies them in light of taxes, corporate framework, and investor protection.

What are golden handshakes really paying for?: ethics-in the light, Schoeman, C. (2014). HR Future, 8(Aug 2014), 42-43. This paper evaluates Golden Handshakes in light of ethics.

Golden handshakes, Wright, A. (2016). In Encyclopedia of Human Resource Management. Edward Elgar Publishing Limited. This paper takes a thorough look at Golden Handshakes, what they entail, their impact, and more.

Golden handshakes and breach of directors’ duties, Hargovan, A. (2014). Governance Directions, 66(5), 278. This paper takes a critical look at the conflict of interest between Golden Handshakes and a Director’s fiduciary duties.

Managerial incentives in the presence of golden handshakes, Jiang, Y. (2017). Finance Research Letters, 20, 177-183. This paper examines the effect of Golden Handshakes on CEOs and the resultant impact on their risk taking behavior.

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