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refers to the combination of rewards and penalties given to key company employees that compensates them so generously for staying and punishes them so severely for leaving that it would be absurd for them to quit the company. There are two ways to keep valuable people with a company. One is to reward them if they stay. The other is to penalize them if they leave. Many companies combine both approaches by mixing generous economic incentives with noncompete agreements and vesting schedules. If the combination of these incentives and disincentives is effective, they can act as golden handcuffs that prevent the employee from leaving. They do so by raising the employee’s expectations of wealth so high that he cannot meet those expectations with another employer, particularly when he considers the restrictions and penalties caused by his leaving. See: Compensation and Bonus Plans, Employment Contracts, ISOs (Incentive Stock Options), Noncompete Agreements, Phantom Stock Plans. |
