“Golden Coffins” on the rise

The following excerpts are from Mark Maremont, Companies Promise CEOs Lavish Posthumous Paydays, Wall St. J., June 10, 2008, at A1:

You still can’t take it with you. But some executives have arranged for the next best thing: huge corporate payouts to their heirs if they die in office. * * *

Dozens of * * * companies offer lush death-benefit packages to their top executives, according to a Wall Street Journal review of federal filings. Many companies accelerate unvested stock awards after a death, which by itself can amount to tens of millions of dollars. Some promise giant posthumous severance payouts, supercharged pensions or even a continuation of executives’ salaries or bonuses for years after they’re dead.

Death benefits, sometimes called golden coffins, have been around for years, but until recently the amounts were often impossible to determine or were shrouded in the fog of proxy-statement language. A federal rule change 18 months ago required companies to be clearer about what they’re obliged to pay if top executives end their employment, under various circumstances. * * *

Companies defend the practice as an appropriate way to take care of an executive’s family after an unexpected death. They also note that the benefits often are negotiated as part of a pay package that has many components. In many cases, compensation attorneys say, death benefits are really a form of deferred compensation, structured partly for estate-planning or tax reasons.

Special thanks to David S. Luber (Attorney at law, Florida Probate Attorney Wills and Estates Law Firm) for bringing this technique to my attention.