"Golden Parachute" - what is it? A comparative new concept for Russia implies the payment of impressive monetary compensation to the top manager in the event of dismissal from the company for reasons beyond his control. Currently, few domestic leaders can boast of the skills of competent parting with employees. So far, few companies use this practice, considering it alien to our mentality.
Dismissal of the "top"
"Golden Parachute" - what is it? As the Finam financial dictionary reads, this is compensation accrued to the senior management of the joint-stock company during its merger. In addition, AO owners can use material rewards of such a plan to prevent hostile takeovers. At the same time, the official documents regulating the functioning of the joint-stock company are amended according to which the management receives substantial compensation, large severance pay, etc., in case of dismissal at the initiative of the new owner.
Simply put, a “golden parachute” upon dismissal is an agreement concluded with a top manager of a company, which provides for the payment of a large amount of money under certain conditions. In this case, compensation may be paid once or monthly in the form of wages even after the termination of employment. An alternative is to provide certain benefits such as blocks of shares or retirement benefits.
The phenomenon under consideration is only emerging in Russia. Five to seven years ago, there was no talk of any compensation. Often, the employer sets a bonus condition for bonus payments, for example, not to switch to service in competing companies for a specified period.
What is it for?
The countervailing measure under consideration is introduced mainly to compensate for the discontent of the dismissed top manager. In addition, it is believed that more than solid incentive payments will prevent fraud within the firm, such as, for example, the withdrawal of assets. Another important point: a “parachute” causes negative consequences for the party that takes over the legal entity and mitigates the blow to the dismissed employees.
In Western countries, it is quite common practice to include a clause on compensations in case of early termination of employment. It is noteworthy that American and European employers provide severance pay not only to senior management of the company, but also to middle managers.
Classification
Depending on the level of the employee and the size of the payments, there are “gold”, “silver” and “tin” “parachutes”. The former are intended for managers, the latter for mid-level managers, and the latter for leading specialists and junior managers.
The size of the "golden parachute" for a top manager can go beyond all conceivable boundaries. It all depends on the company's management and field of activity. So, the biggest "parachutes" are "opened" for financiers and bankers. For example, in the United States (which was where the concept came to be) in the notorious 2008 investment banks that failed, they could not abandon their established obligations, so even bankrupt people paid billions of dollars to their top managers as compensation.
The giant losses of banks prompted the US Congress to vote for a decision to limit compensation payments and to completely review the level of salaries of senior management.
How about us?
In Russia, “parachute” practice took shape in very unstable economic conditions. Only in August 2009, amendments to the law "On Joint Stock Companies" were introduced by the Federal Service for Financial Markets. As a result, compensation began to be allowed to general directors and members of the board of directors with whom labor relations are canceled ahead of schedule . It is clear that today it is too early to talk about the ideal legislation in this regard. That is why there are still a number of problematic issues faced by organizations that have decided to issue “golden parachutes” to top managers.
Based on Russian legislation, we note that at present, a “golden parachute” is a condition for material compensation in the event of termination of an employment relationship, which is specified in the employment contract or is made out in the form of an additional agreement between the employee and the employer. In this case, compensation is paid in the following cases:
- dismissal by agreement of the parties to the employment contract (Article 78 of the Labor Code of the Russian Federation);
- dismissal due to staff reductions (Article 81, paragraph 2 of the Labor Code of the Russian Federation);
- liquidation of the company (Article 81, paragraph 1);
- dismissal of an employee of his own free will (Article 80);
- change of ownership of the company (also applies to the chief accountant, manager and persons replacing him; Article 81, Clause 4).
In reality, the official registration of the so-called compensation in Russia is not so common. This mainly happens when foreign employees or top-level domestic specialists with experience working abroad are dismissed. Moreover, the standard Russian problem is the difficulty in providing material compensation in connection with payroll according to the so-called gray schemes.
What is more important, money or gratitude?
Often you can observe this situation: the management of the company decides that it no longer needs the services of a certain top manager, since the direction he supervises is subject to closure. In this case, it is more important for a person to receive not money, but the respectful attitude of the employer, since he considers himself an experienced and valuable specialist. Employees of many Russian companies faced this problem during the 2008 crisis. Especially at that time, people involved in real estate and insurance suffered.
How to ensure the loyalty of the dismissed?
"Golden Parachute" - what is it? The compensation measure under consideration allows us to maintain a good attitude of an already former employee to the company, despite the reason for the termination of the employment agreement. At the same time, staff specialists make a thorough analysis of the reasons for the dissatisfaction of the dismissed. This process is an integral part of the work on the HR brand of any self-respecting organization. That is why with each outgoing employee a final interview is conducted, the results of which reveal his attitude to the existing working conditions, wages, colleagues, and the employer.
"Parachute" blackmail
What are the real reasons that the practice of material compensation is not widespread in Russia? There are several answers to this question. First of all, it is necessary to take into account the fact that most domestic companies are managed by owners, and a “golden parachute” minimizes the dependence of the top manager on business owners. Putting your business in the hands of a hired leader and making it independent and financially unprofitable, and psychologically inconvenient.
In addition, there is an opinion that the practice of "golden parachutes" upon absorption causes the erosion of the shareholder value of the company by at least twelve percent, since financially insured employees are not afraid to lose their place, which often entails a decrease in their productivity.
The third reason: when adding the material payments under consideration to a compensation package of a higher composition, owners and shareholders increase the risk of “parachute” blackmail if they do not have a clear mechanism for controlling and managing hired employees.
"Golden Parachute" - what is it? If the parties play fair, it becomes an incentive to increase the efficiency of work. For example, the owner intends to put the company up for sale, but is not sure about the effectiveness of the transaction. In order to capitalize, he recruits a team of professionals, each of whom promises to pay material remuneration as a guarantee of income.
The described approach works where people do not lose face and do not try to manipulate each other.
Fabulous amounts
The largest "golden parachute" "opened" for Richard Full - the former CEO of the American bank Lehman Brothers. After his dismissal, he became richer by three hundred million dollars. The most “dear” domestic manager is Vladimir Strzhalkovsky, the ex-general director of Norilsk Nickel. His wallet has replenished with a hundred million dollars. The second place was taken by the former president of Uralkali Denis Morozov. He was paid about seven million dollars. On the third step is Alexander Provotorov. The ex-director of Rostelecom received two hundred million Russian rubles as compensation.
The reaction of the president. Law “On Golden Parachutes”
The debate about the amount of material compensation received by A. Provotorov did not subside for a long time. Against the background of polemics on this subject, many deputies noted that the restriction of "golden" parachutes would be an appropriate measure in the current economic conditions. The initiative was approved by Vladimir Putin. As a result, in May 2013, the State Duma introduced a draft law on limiting payments to top managers upon dismissal. In March 2014, it was approved by the Federation Council. Now, "golden parachutes" for officials can not be more than three of their salaries. In addition, the Labor Code was replenished with an article which states that compensation payments cannot be received by persons dismissed on the basis of disciplinary sanctions or because of guilty acts.
Important
The provisions of the new law and amendments to the TC apply to managers, their deputies and chief accountants of state-owned companies and corporations, state unitary enterprises and municipal unitary enterprises, as well as companies with the participation of the municipality or state.