Silver Parachute

A form of severance that is paid to employees of a company that is taken over by another company. Similar to golden parachutes – which are received by the top executives in the corporation – silver parachutes include severance pay, stock options and bonuses. While golden parachutes are given to a small number of employees, silver parachutes are generally extended to a larger number of employees. Silver parachutes often appear as clauses in hiring contracts that call for lucrative severance packages if an employee leaves the company, or, in particular, after a merger, acquisition, or other change in corporate control.

A silver parachute is typically smaller than a golden parachute, but more employees are eligible to receive one. Golden and silver parachutes are named such because they are intended to provide a “soft landing” for employees who lose their jobs either through corporate restructuring, mergers, or other reasons. In certain cases, a silver parachute clause specifies that the benefits go into effect only if the company is taken over by another company, resulting in the employee losing his or her job.