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$260 Million After Death? How Rich Executives Make Money From Beyond the Grave

Under "golden coffin" arrangements, CEOs who die while still employed may be entitled to lavish payouts upon death.

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Ivan Seidenberg at Verizon was entitled to nearly $50 million upon death before he stepped down in 2011. Nicholas Chabraja at General Dynamics, meanwhile, was offered an $8.2 million consolation prize for not being able to use the corporate jet after death. They say you can’t take it with you, but some of these power brokers are certainly trying.

Since 2006, information about golden coffins has been publicly available under new Securities and Exchange Commission rules concerning disclosure of executive compensation. Growing interest in executive compensation has accompanied public filings, especially starting in 2008, with a shifting economy that made such profligate spending appear not just inefficient, but also offensive. However, there’s been surprisingly little rebellion among shareholders on the subject of executive compensation, particularly golden coffins.

This may be because they come with nice names like “Family Income Assurance Plan” at Disney, which promises such packages to new executive officers as an added incentive to join the company. Evidently pay and bonuses in the millions simply don’t provide enough for Disney executives to set up savings accounts for their family members, or establish life insurance policies to provide coverage in the event of their deaths. It’s a hard-knock life for executives.

News about golden coffins began cropping up in the financial media in 2008, in the midst of a growing economic crisis that made executive compensation an even more contentious issue than ever before. One of the most common criticisms of ludicrously expansive compensation packages had been that they were not tied to performance, entitling CEOs to ample sums regardless of how well their companies did in a given fiscal year, and very little seems to have changed. The golden coffin is perhaps the pinnacle of absurdity when it comes to executive compensation; not only is it not tied to performance, but the executive doesn’t even need to be alive to collect it.

Families of some of the world’s wealthiest CEOs are already in a comfortable financial position, as many come from families with substantial personal wealth and have added to it during their years at the helms of big name companies. The claim that families might be left insolvent after the loss of their primary breadwinners is a bit much, given the increasing inequality in income distribution. All of that money they’re earning has to be going somewhere, since it isn’t circulating back to the rest of the population, and it’s added to upon death in service for those who don’t make it to the juicy retirement benefits also structured into executive contracts.

Those bonuses, unvested options, and other plums simply revert to families, rather than being taken off the table in the event of a death. And, of course, thanks to the structure of the tax system in the United States, much of this money comes tax-free to survivors, a parting gift from family members who already avoided their fair share of tax liabilities in life.

Even Congress has taken note of the excesses of executive compensation and the role it played in the development of  the financial crisis; the Dodd-Frank Wall Street Reform and Consumer Protection Act explicitly included reforms targeted at some of the most egregious excesses of Wall Street. Among other things, shareholders now have the right to “say on pay,” refusing executive compensation they feel is unreasonable. Golden coffins are part and parcel of the compensation packages shareholders can vote on, if they exercise their right to do so.

This could pave the way to more shareholder activism to reform practices at some of the world’s largest publicly traded firms. The practice of leveraging shareholder positions to improve payout for fellow shareholders is nothing new, and it’s also been historically utilized as a tool for political and social activism, which sometimes results in strange bedfellows. Hedge funds and teacher’s unions, for instance, may team up to challenge corporate boards. Social justice organizations frustrated with the environmental and political practices of major corporations have purchased shares and subsequently used shareholder resolutions for activities like pressing McDonald’s to improve animal welfare at its source farms and facilities.

 
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