Corporate Governance

Until Death Do Us Part: Executive Compensation and Golden Coffins

By J. Robert Brown

The WSJ has yet another article on executive compensation.  This time it includes data on golden coffins, amounts paid out after the CEO dies.  The amounts are often extraordinary.  They involve a mix of cash payments, insurance proceeds, and accelerated awards. 

Moreover, some of the recipients seem to be at the top of every list of executive benefits.  Look at the posts on Ray Irani at Occidental, with one addressing total compensation ($77.6 million).  He is also the beneficiary of over $700,000 paid by Occidental for his security.  Now we learn that while he does well when alive, he also does quite well when dead.  

As with all things relating to executive compensation, the issue is one of state law standards.  If the Delaware courts imposed meaningful standards on directors in connection with the determination of CEO compensation, the types and amounts would cause little concern.  But Delaware does not.  Indeed, the WSJ article suggests that these payments only came to light in a meaningful way after the SEC's reform of the executive compensation disclosure requirements. 

In other words, boards could award this type of compensation and, until the reforms, avoid the fallout that comes with disclosure.  All of this suggests that that executive compensation is not related to merit and performance.  Why not?  Because, as a practical matter, Delaware court do not require that such a relationship exist.

We duplicate the table for the WSJ article below. 

Full post as published by The Race to the Bottom on June 10, 2008 (boomark / email).