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Compensation for loss of office


A sum of money given to a director on his leaving a company. It is often given in addition to. or in lieu of, a retirement pension, but more frequently is in effect a redundancy payment following a change of ownership, when a new board of directors is being substituted for the old. These amounts must be shown separately in the accounts of limited companies. They are often very high, particularly if the director was also an important shareholder and is retiring. Because the size of the figure very often seems to bear no relation to the actual loss suffered or work done, these payments have become known as 'golden handshakes'.

Reference: The Penguin Business Dictionary, 3rd edt.