I’m thrilled to talk about a recent example of “golden parachutes” in action, involving three former Twitter executives. If you’re not familiar with the term, a golden parachute is a hefty package of benefits given to top executives if their company is bought out and they’re let go as a result. These benefits often include stock options, cash bonuses, and a generous severance pay. It’s like winning the lottery!
The three Twitter executives, CEO Parag Agrawal, CFO Ned Segal, and Head of Legal Policy Vijaya Gadde, had golden parachute clauses in their contracts when Twitter merged with Musk’s X Holdings. After the $44 billion acquisition, Musk let all three go. But thanks to the golden parachute clause, they were set to receive stock worth $119.6 million as severance. Here’s the breakdown: Agrawal was to get around $74 million, Segal about $65 million, and Gadde $60 million. Not bad, right?
But here’s the catch. These golden parachutes aren’t guaranteed. Musk reportedly fired these executives for cause, meaning they did something wrong. If that’s the case, they lose their right to a severance package. The majority of their severance package was in the form of unvested Twitter stock, worth $119.6 million. By firing them for cause, Musk saves that amount plus any additional severance payment based on their salaries.
This brings us to an important point: there’s a big difference between being fired and being laid off. If you’re laid off, you’re eligible for severance payment, deferred compensation, and unemployment benefits. It’s usually not your fault, and it doesn’t leave a black mark on your employment record. This can help you land a new job and get good references.
So, why were the Twitter executives fired? Musk might have a hard time justifying it, but from his perspective, it’s clear. He believes they were the reason he had to pay more than he thought was reasonable for the acquisition. He also thinks they were incompetent for not monetizing the platform enough, not minimizing Twitter bots, not limiting disinformation, and not earning enough money despite poor share price performance.
But there’s another side to this story. Twitter shareholders are happy because they got bought out for more than 100% of the fair market value. In the long term, Musk could make Twitter even more valuable. But for now, the public won’t be able to participate in the upside.
The ex-executives might sue Elon and Twitter to fight for their golden parachutes. There’s a lot of money at stake for them.
If you’re employed, it’s worth checking if you have a golden parachute. Ask your HR or manager what would happen if your company was bought out. If you’re not satisfied with the answer, negotiate for a better golden parachute.
Remember, everything is negotiable when it comes to money. Understanding your employer’s needs and helping with the transition can make them more willing to offer you a severance package.
Don’t be afraid to fight for your freedom. Negotiating a severance package can be the catalyst for leaving a job you’re unhappy with. It was for me, and more than 10 years later, I couldn’t be happier with my decision.
I hope this Twitter golden parachute case study motivates you to make a change if you’re unhappy with your job. And remember, you can always negotiate a severance. It’s a win-win scenario for you and your employer.
