Companies Promise CEOs Lavish Posthumous Paydays

[question everything]

The Wall Street Journal

Companies Promise CEOs Lavish Posthumous Paydays
Options Vest, Insurance Flows; Even Salaries May Continue
By MARK MAREMONT
See Corrections & Amplifications below.
June 10, 2008; Page A1

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Dozens of other 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.

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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. A death of a CEO or chairman often is a traumatic event, both for the family and for the suddenly leaderless company. But compensation critics say that's no reason to lose sight of the pay-for-performance principle that many boards now espouse. And they call death benefits the ultimate in pay that isn't based on performance.

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. Companies often say one goal of their pay packages is to keep executives from leaving. But "if the executive is dead, you're certainly not retaining them," says Steven Hall, an executive-pay consultant in New York. Mr. Hall says death benefits have become more controversial in recent years: "Shareholders say, 'Why should we write a big check to a CEO who's been quite well paid all along?' He should have bought life insurance."

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A salary-after-death provision has just been scrapped at Comcast Corp. The board in late December had renewed a provision that gave Ralph J. Roberts, the 88-year-old chairman of its executive committee, his $2 million annual salary for five years after his death. But in February, Comcast canceled the deal amid criticism from a big shareholder, Chieftain Capital Management. David Cohen, a Comcast executive vice president, said Mr. Roberts voluntarily relinquished the benefit, in a move that had been under consideration for some time. Still, as of Dec. 31, Mr. Roberts was entitled to an estimated $87 million in posthumous benefits from the Philadelphia-based cable-television company. Most of it consisted of continued company funding of joint life insurance covering him and his wife, filings show. The insurance would pay a total of $130 million to their estates after both are deceased.

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A recent study of 93 big companies found that 17% offered severance-style death benefits to their chief executives in 2006, while 40% provided corporate-funded life insurance. Equilar Inc., a research firm in Redwood Shores, Calif., did the study.

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URL for this article:
http://online.wsj.com/article/SB121305922859459465.html (subscription)

[brentspeak]

1. What's next? Pyramids? CEO mummies in ornate, gold caskets?

[question everything]

2. I found it interesting, though, that McCain was talking against

outrageous compensations for CEOs.