$260 Million After Death? How Rich Executives Make Money From Beyond the Grave
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Should Omnicom CEO John Wren die in office, his family will collect $41 million in posthumous benefits, including equity awards, incentives and life insurance. He’s not alone; numerous companies have special clauses embedded in their executive compensation contracts to provide massive payouts in the event of a death. Talk about pay for performance.
As if excessive executive compensation wasn't bad enough with living CEOs, some lucky ducks have some rather unique postmortem severance benefits. Under "golden coffin" arrangements, CEOs who die in harness may be entitled to lavish payouts upon death. We're not talking funerary wreaths here: Nabors Industries CEO Eugene Isenberg would have been due over $260 million upon death before his compensation was renegotiated in 2009; James Bernhard at Shaw was promised $17.4 million just for agreeing not to compete after death, and that didn’t include the rest of his compensation package; and Michael Jeffries at Abercrombie & Fitch was pledged a comparatively modest $17 million. Their family members certainly won’t be hurting for Maseratis when the bell tolls.
This compensation includes unearned pay, stock options and other benefits provided to family members in hefty financial commitments guaranteed in the event of a death in office. Cynics suggest that golden coffins help fend off hostile takeover attempts by ensuring that no acquiring company would want to take on such obligations, while proponents say they provide financial protection and security to the families of high-ranking company officers. Surely, CEOs wouldn’t want to worry that they would leave family members on the brink of bankruptcy after death; after all, they only make a paltry average of over $11 million annually.
Needless to say, such generous compensation isn’t available to regular employees who die before retirement, even when they die on the job. In 2010, BP attempted to get away with offering minimal compensation to the families of Deepwater Horizon victims, for example. Death benefits available to public employees are under attack along with other aspects of government pension plans, and many workers in the private sector cannot expect family assistance if they die while working, unless they’re working for union companies. Even then, the payouts are scant, usually barely enough to cover the costs of the funeral, let alone settle debts. As for perks like unearned wages and bonuses? Not very likely.
Golden coffins aren’t a reward for service and hard work, or we’d expect equally generous offers to loyal employees who die before retirement. In a culture where death by overwork is a chronic problem, few companies would be willing to take on death benefits for employees who die in service; the liabilities could be bankrupting. Just to the contrary: some companies take out what is known as “ dead peasant” insurance on rank and file employees, collecting life insurance in the event of a death without offering any payout to the family.
Golden coffins are instead an example of the sweeteners offered to convince executives to sign on and stay on in a highly competitive culture where multiple firms can afford to woo CEOs away from rivals with generous offers. The very idea that CEOs should be offered a no-compete bonus that extends into the afterlife sounds ludicrous, but is very much a real part of the golden coffin package for some CEOs.
The Wall Street Journal provided a breakdown of some of the most extreme examples several years ago. Before changes to his compensation agreement, Brian Roberts at Comcast was entitled to a $60 million cash settlement upon death, along with $14 million in “accelerated rewards” and a $223 million life insurance policy, setting his family up with almost $300 million in benefits. His package included payouts of salary and bonuses for five years after death; evidently being six feet under doesn’t stop you from earning an annual performance bonus for your hard work.