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What Is a Golden Coffin?

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  • Written By: Mary McMahon
  • Edited By: Shereen Skola
  • Last Modified Date: 19 August 2019
  • Copyright Protected:
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    Conjecture Corporation
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A golden coffin is a large death benefit paid out to survivors of an executive who dies in office. Such benefits are part of a negotiated compensation contract entered into at the start of employment and periodically revised. In debates about executive compensation, some unusually large payouts have been brought up as an example of excessive benefits. Advocates for shareholders may argue that excessive compensation hurts a company’s bottom line and thus shouldn’t be permitted.

The size and contents of a golden coffin can vary. It typically includes unearned wages and may also offer stock options and insurance benefits. Heirs could also retain the right to use, at least temporarily, services like company housing and cars. Such benefits can offer compensation to family members after the loss of income associated with a death, and can also cover expenses related to the death.

Provision of some death benefits not just to executives, but all employees, is not uncommon in some sectors. Some employers may offer assistance with the cost of a funeral, settling medical bills, and other death expenses, either directly or by funding insurance policies. The golden coffin, however, goes above and beyond in terms of the kinds of benefits offered. Compensation, in United States Dollars (USD), may reach well into the millions.

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Supporters of golden coffins argue that they serve several functions. They can be important during recruitment when a company wants to attract executive talent and may need to sweeten the deal, especially if multiple employers are competing for the same applicant. Additionally, they can create an obstacle to unwanted takeovers, as an acquiring firm may be reluctant to take on the commitment of paying death benefits. Since a golden coffin only kicks in when an executive dies while still employed by the firm, it also may never come due, so it’s a form of calculated risk.

Opponents argue that lavish executive compensation detracts from the bottom line. While attracting innovative executive talent can be important, shareholders may vote against large compensation packages if they believe they conflict with the interest of the company. The golden coffin can also potentially create a sizable financial liability if the company does need to pay out and doesn’t have the available capital. These critics may support provision of some death benefits to cover the funeral and related expenses, but wish to rein in large expenditures that do not directly contribute to the company’s growth and development.

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