WHAT IS 'Golden Coffin'

A golden coffin is a death benefit package awarded to the heirs of high ranking executives who die while still employed with a company. Benefits awarded can include unearned salary, accelerated stock options and insurance proceeds.

BREAKING DOWN 'Golden Coffin'

Most public companies include golden coffin, or death benefits with other types of termination-related pay due their CEOs, with variations for whether the person is fired, becomes disabled or dies in office. Death benefits are layered on top of pensions, vested stock awards and deferred compensation, which for most CEOs already amount to large sums.

Pros and cons of golden coffin benefits

At many companies, a top executive's death triggers a large insurance payout to heirs on a policy the company paid for. Pay consultants trace one of the earliest golden coffins to Armand Hammer of Occidental Petroleum Corp. His contract called for his salary to be paid until his 99th year, whether he was alive or dead. He died at 92 in 1990.Though not all companies provide it, the most common posthumous benefit is acceleration of unvested stock options and grants of restricted stock. The rationale is that if the executive hadn't died, they would probably have stayed long enough for the awards to vest. Accelerated unvested stock awards after a death can amount to tens of millions of dollars. Some promise large posthumous severance payouts, supercharged pensions or even a continuation of executives' salaries or bonuses for years after they're dead.

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. Death benefits have become more controversial in recent years. Shareholders are reluctant to award posthumous benefits to executives that have been well paid all along.

Proponents of golden coffins claim that such death benefit packages are rarely paid out and act as inexpensive way to keep top executives and discourage unwanted takeover attempts. Companies defend the practice as an appropriate way to take care of an executive's family after an unexpected death. The benefits often are negotiated as part of a pay package that has many components. In many cases, 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.

  1. Accelerated Death Benefit (ADB)

    An accelerated death benefit (ADB) allows a life insurance policyholder ...
  2. Guaranteed Earning Increase Death ...

    A guaranteed earning increase death benefit is a type of option ...
  3. Death Bond

    A death bond is a security derived by pooling together transferable ...
  4. Golden Life Jacket

    A golden life jacket is a large compensation package offered ...
  5. Death Cross

    A death cross pattern occurs when a security's short-term moving ...
  6. Golden Boot

    A golden boot is a financial package offered to encourage an ...
Related Articles
  1. Managing Wealth

    Life Insurance With an Increasing Death Benefit

    Why buy a life insurance policy with an increasing rather than level death benefit
  2. Insurance

    How a Death Benefit in a Variable Annuity Works

    Before making investment decisions it’s important to fully understand what you're paying for and if the cost makes sense in your particular situation.
  3. Insurance

    5 Things You Didn't Know About Life Insurance

    Life insurance policies can be simple or complex; make sure you know as much as you can before setting up yours.
  4. Investing

    Evaluating Executive Compensation

    Learn about the different types of CEO compensation, where you can find this information, and how it can affect your investments.
  5. Insurance

    Tips for Helping Clients with Life Insurance Needs

    Life insurance needs will likely change over the client’s lifetime and again financial advisers can provide an objective sounding board.
  6. Financial Advisor

    How Linked Benefit Insurance Policies Work

    Linked benefit policies can be a viable alternative to traditional long-term care insurance. Here's how they work.
  7. Personal Finance

    New Job? Your Stock Compensation Might Change

    Employee stock options may be handled differently when you leave a job.
  8. Personal Finance

    Plan for the Inevitable: How We Can Prepare for Death

    Preparing for death doesn't just include getting your financial house in order.
  9. Retirement

    When Do Social Security Benefits Start and End?

    Everything you need to know about the three primary Social Security programs, how they work and who qualifies for them.
  10. Insurance

    How Much Life Insurance Should You Carry?

    Before purchasing life insurance it is important to decide if you really need it, what type of policy is best, and how much coverage you should get.
Trading Center