Writing a book on negotiating severance packages, I always find joy in observing public examples. Recently, the spotlight shone on the “golden parachutes” granted to three former Twitter executives.
The term “golden parachute” refers to significant benefits awarded to top executives if the company merges or is acquired by another, resulting in their termination. These perks often encompass stock options, cash bonuses, and substantial severance payments.
Receiving a golden parachute is akin to winning a jackpot, allowing you to metaphorically leap off a cliff or escape a burning plane and still land safely on your feet.
The Golden Parachutes for Twitter’s Executives
In Twitter’s merger with Musk’s X Holdings, three key executives – CEO Parag Agrawal, CFO Ned Segal, and Head of Legal Policy Vijaya Gadde – were entitled to a “golden parachute” clause. After the $44 billion acquisition on October 27, 2022, Musk dismissed all three. However, the “Golden Parachute Compensation” section in Twitter’s SEC filing indicates they would automatically receive stock worth $119.6 million if terminated.
Here’s the breakdown of the golden parachute packages:
- CEO Agrawal: Approximately $74 million
- CFO Segal: Around $65 million
- Head Of Legal Policy Gadde: $60 million
Considering Twitter’s fluctuating share prices since its initial public offering in November 2013, these packages are significant.
Your Right to a Severance Package
A common doubt many have about severance negotiations is why management would ever agree to one. But the golden parachutes of these executives demonstrate that it’s possible, particularly if you’ve contributed value to the company.
Companies generally prefer parting with employees on amicable terms. Negative publicity from a disgruntled ex-employee can damage a company’s reputation, hindering future business and attracting top talent.
I can personally relate to the importance of proper severance, having successfully coached my wife in negotiating a package worth over $100,000. This negotiation not only went smoothly but led to a part-time consulting role with a 60% pay increase.
Fired vs. Laid Off: The Golden Parachute Difference
It’s important to note that golden parachutes are not guaranteed. Musk reportedly fired the Twitter executives for cause, meaning due to inappropriate behavior. This eliminates the ability to receive a severance package, saving Musk $119.6 million in unvested Twitter stock payments.
Firing for cause usually arises from severe misconduct, while being laid off is a more neutral separation, often due to economic or organizational reasons. The difference matters in terms of receiving severance, eligibility for unemployment benefits, and maintaining a clean employment record.
The Reason Behind Twitter Executives’ Firing
Musk may face challenges in justifying the firing of the Twitter executives, but his reasons are clear. Their stance during the acquisition negotiations and perceived inadequacies may have led him to the decision.
Some might argue that they were dismissed unjustly, given Twitter’s shareholders’ satisfaction with the acquisition price. Musk’s long-term vision for Twitter might significantly increase its value, and a lawsuit for the golden parachutes by the ex-executives is a possibility.
Navigating Your Golden Parachute Severance Package
If you are currently employed, it’s worth inquiring about your potential golden parachute. Investigate the protocols in case of a merger or acquisition, and negotiate if necessary.
Being part of a company acquisition might be an opportunity. You could receive an attractive severance package or be retained with a better package, providing choices to either “rest-and-vest” or work harder for further growth.
Since 2009, I have emphasized that everything related to money is negotiable. The secret to a favorable severance lies in understanding your employer’s needs and helping with the transition. This realization has guided me, my wife, and thousands of readers of my ebook, “How To Engineer Your Layoff: Make A Small Fortune By Saying Goodbye,” now in its 5th edition, to successfully negotiate severance packages like experts.
