What is a Golden Bungee?

Many are familiar with the terms golden parachute and golden handshake. The former is a generous severance package given to high-level employees, usually when another owner acquires the company, and the employee loses his job. The golden handshake also offers payments but is usually an incentive to encourage employees that are close to retiring to do so. The golden bungee or golden bungee cord is different from both of these other terms because the employee stays employed.

Essentially, the golden bungee cord may come into effect if there is a merger or company takeover. This activates the first step, which is to automatically give the executive special bonuses, extra stock or large amounts of additional pay. However, this is not paid because the employee leaves. In fact, in most cases the employee has a guaranteed position with the new company.

It’s easy to see how the metaphor of the bungee cord applies. Instead of parachuting down to safety with a sizable severance package, the employee bounces back to a new job or to nearly the same job he has always worked. The practice has both its fans and critics because of the size of severance packages paid to executives.

Some argue that the golden bungee is another example of the excess in certain businesses and the greatly disproportionate benefits and pay given to executives. In contrast, many believe there is a place for this type of benefit package especially when attracting high-level executives. If there is likelihood of an imminent merger or the company will be acquired elsewhere, particularly younger executives may not want to work for the company because they may have to look for another job quickly. Even when a company’s plans are not evident, mergers and acquisitions are fairly common, and the golden bungee may provide additional incentive to take a job.

Another common reason to support bungee clauses is that some top-level executives may be asked to participate in mergers or acquisitions. They’ll have little reason to do so if they will lose their jobs as a result. A successful merge with another company would then reward these employees while securing their jobs, and usually golden bungee cords are offered at point of hire and are written into contracts.

Though it's most common for executives to benefit from this type of severance pay with continued employment, some lower level workers may be given a golden bungee cord too. Sometimes when a company gets acquired, the new owner still needs many of the employees to continue working. These employees may have significant amounts of stock that offer an immediate payout upon the company being purchased, and they still retain their jobs. This may especially occur when companies are startups and each employee gets a generous amount of stock as part of their compensation package. However, for most employees who are lower level, the golden bungee isn’t in a contract, and those who retain jobs after a merge or acquisition are usually lucky to do so.