Golden Coffins

According to a report in the Wall Street Journal, if Rupert Murdoch, CEO of News Corp. were to pass away this week, the company would immediately pay death benefits to his estate in the amount of $1.37 million. That’s right, folks; Mr. Murdoch’s heirs would receive an extra $1.37 million US, just because he died while still employed there. Most of us working stiffs have some sort of minor death benefit – usually just enough to cover funeral expenses, unless we want to pony up the premiums ourselves. But Rupert Murdoch, a multi-billionaire, is getting a death benefit equal to roughly 30 years of my salary. It sounds preposterous, doesn’t it? Until you realize that the President of News Corp. (57-year-old Peter Chernin) is slated to receive $5 million in company-funded life insurance and $32 million in other benefits if he passes away during this fiscal year…

Benefits of this type are generally known as “Golden Coffins,” and are justified the same way every other outrageous Executive perk is justified: as being necessary to attract and retain the best people. And to some extent this might be true; if you can get a $300 million benefit from Company A versus a $50 million benefit from Company B, for doing the same job, you’d probably go to work for Company A, wouldn’t you? The real question here is what, exactly, these executives do that is worth paying them salaries and bonuses in the hundreds of millions of dollars in the first place. Especially when you consider that said executives will be dead at the time these benefits are being paid out…

Consider the case of Brian Roberts, CEO of Comcast, whose $298 million dollar death benefits including continuing his salary and benefits for five years after his death. Or consider Disney’s Robert Iger, who will receive $62.4 million including three years of his salary. Or Charles Schwab, founder of the firm which bears his name, who will receive $3.7 million per year for 15 years for the license of his name as part of the $64.5 million he will receive after he passes away. Or, most amazing of all, consider Eugene Isenberg, CEO of Nabors Industries, who will receive $263.6 million in severance pay when he dies. No matter how good Mr. Isenberg is at his job, it’s difficult to fathom why he should be paid the equivalent of employing 186 people for 30 YEARS EACH at my current salary just for dropping dead…

The people who are advocating CEO compensation reform call these arrangements the ultimate example of not paying for performance, and in many ways they are quite correct. Some CEOs (and their apologists) excuse such arrangements as being based on the company’s stock price: since the death benefit is based on how well the company is doing, this supposedly gives the CEO an extra incentive to maximize stockholder value. Critics will quickly point out that every CEO is being paid to maximize stockholder value already, and many of them are being paid hundreds of millions of dollars to do so; if they want to leave 9-figure fortunes for their heirs they can surely afford to buy their own life insurance…

Personally, I’ve never had any issue with “pay for performance” programs; if the only change to your company was a new CEO, and your company’s performance improved by $700 million that year, I see nothing wrong with offering that individual a few percentage points of the improvement. Provided, of course, that he or she gets no bonus in a year where performance deteriorates, and is fired if that performance continues to degrade for several additional years. And personally, I would prefer to be worth more to the company (and my heirs) alive than I am dead. But as a taxpayer (and in some cases as a stockholder as well) I have to question how much these outrageous death benefits really contribute to the health of the company…