A golden umbrella is a clause in an
entrepreneur
Entrepreneurship is the creation or extraction of economic value. With this definition, entrepreneurship is viewed as change, generally entailing risk beyond what is normally encountered in starting a business, which may include other values th ...
's
contract
A contract is a legally enforceable agreement between two or more parties that creates, defines, and governs mutual rights and obligations between them. A contract typically involves the transfer of goods, services, money, or a promise to tran ...
with their
company
A company, abbreviated as co., is a Legal personality, legal entity representing an association of people, whether Natural person, natural, Legal person, legal or a mixture of both, with a specific objective. Company members share a common p ...
, typically the
CEO
A chief executive officer (CEO), also known as a central executive officer (CEO), chief administrator officer (CAO) or just chief executive (CE), is one of a number of corporate executives charged with the management of an organization especially ...
or
COO
COO or coo may refer to:
Business
* Certificate of origin, used in international trade
* Chief operating officer or chief operations officer, high-ranking corporate official
* Concept of operations, used in Systems Engineering Management Process
...
, that guarantees a certain payout for the
risk
In simple terms, risk is the possibility of something bad happening. Risk involves uncertainty about the effects/implications of an activity with respect to something that humans value (such as health, well-being, wealth, property or the environme ...
they bear in starting the company.
[http://www.reachinformation.com/define/Golden%20umbrella.aspx ''Retrieved on April 3, 2014'']
The down-side of a golden umbrella is that
angel investor
An angel investor (also known as a business angel, informal investor, angel funder, private investor, or seed investor) is an individual who provides capital for a business or businesses start-up, usually in exchange for convertible debt or owners ...
s typically do not know the terms of a golden umbrella, thus a CEO may start a company, grow the company, seek first-round and second-round
venture capital
Venture capital (often abbreviated as VC) is a form of private equity financing that is provided by venture capital firms or funds to startups, early-stage, and emerging companies that have been deemed to have high growth potential or which ha ...
, and then exit the company with a large pay-out just before the company's market growth takes a downturn due to poor business planning. Hence cheating out on the investors or sponsors
See also
*
Golden handshake
*
Golden parachute
A golden parachute is an agreement between a company and an employee (usually an upper executive) specifying that the employee will receive certain significant benefits if employment is terminated. These may include severance pay, cash bonuses, s ...
References
Business terms
Executive compensation
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