A golden handshake is a clause in an employment agreement, promising that an employer will pay an employee a significant amount if the person's employment is terminated. Golden handshakes are usually provided to senior managers or key employees as an inducement for them to either start or continue working for an organization. It is especially common when enticing an outsider to work for the company - which is a risky proposition for the individual. The payment is commonly made in exchange for an employee not saying anything damaging about the company subsequent to his or her departure.
Under this arrangement, a departing employee may be paid in cash, stock options, the forgiveness of a loan, or some type of benefit, such as lifetime health insurance.
Investors may be concerned about the existence of golden handshake agreements, since these deals can trigger large reductions in the reported amount of profits by a business.