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How Unemployment Works


Golden Parachutes and Reference Letters
Severance, golden parachutes and reference letters are all important to know about if you get fired.
Severance, golden parachutes and reference letters are all important to know about if you get fired.
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Also called golden handshakes or change-in-control payments, a golden parachute is a large sum of money -- or a combination of cash, stock options, consulting contracts and other benefits -- that executives receive in the event of a takeover or change in ownership of a company. The practice became popular in the 1980s, but with the passage of the Dodd-Frank Act in April of 2011, company shareholders now get a vote about these types of payments [source: United States Committee on Banking, Housing, & Urban Affairs].

The initial idea behind golden parachutes was to guarantee compensation to an executive should he or she be fired after a merger or takeover, but some CEOs were receiving large pay packages in mergers and still remaining in control of the new company [source: Thornton]. An example is former Gillette CEO James Kilts, who received a $165 million pay package after orchestrating the sale of Gillette to Procter & Gamble in 2005. Critics claimed he benefited financially at the expense of shareholders and the 6,000 jobs cut in the sale.

Some executives also receive golden handshake-type severance packages when they resign. In 2011, Hewlett-Packard CEO Leo Apotheker was ousted after just 11 months and received a severance package of $13.2 million in cash and stock, not to mention a sign-on package worth $10 million [source: Financial Times]. However, other executives have declined opportunities to receive large payouts, claiming that their regular compensation is sufficient and that executives should match company performance and align with shareholders’ interests [source: Howard] .

References

Though letters of reference may be one of the last things on your mind when you’re fired, this is actually the best time to consider them. Of course, obtaining a letter of reference can depend on the circumstances of your termination, but prospective employers can take it as a bad sign if you don't put down a past employer as a reference. If you are unhappy with a reference letter, you can try to discuss it with the writer.

You can also request a service letter explaining the reasons for your termination. A service letter is required by law upon request in California, Delaware, Indiana, Kansas, Maine, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, New York, Tennessee, Texas and Washington. If unable to obtain a service letter, ask your supervisor for the reason behind your termination and write it down. Include the date, time, place and any witnesses. Read the letter to your supervisor and ask him to confirm its content.