Even dead CEOs get fat paychecks

By The Wall Street Journal

You still can't take it with you. But some executives have arranged for the next best thing: huge corporate payouts to their heirs if they die in office.

Take Eugene Isenberg, the 78-year-old chief executive of Nabors Industries (NBR, news, msgs). If Isenberg were to die tomorrow, Nabors would owe his estate a "severance" payment of at least $263.6 million, company filings show. That's more than the first-quarter earnings at the Houston oil-services company.

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.

New rules require greater transparency

The CEO of Shaw Group (SGR, news, msgs) is in line to be paid $17 million for not competing with the engineering and construction company after he dies.

Lockheed Martin's (LMT, news, msgs) top officer didn't even need to die to get a death benefit; Lockheed paid out the sum, about $1 million, in March while he was still very much alive.

• Talk back: How much should a deceased executive be paid?

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.

The 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.

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."

At many companies, a top executive's death does trigger a big insurance payout to heirs -- on a policy the company paid for.

A $3 million life insurance policy is just a minor part of the death benefits that XTO Energy (XTO, news, msgs) provides to its CEO, Bob R. Simpson.

Had Simpson died on Dec. 31, according to the natural-gas producer's latest proxy statement, XTO would have owed his heirs a $111 million "bonus." Stock options that the 59-year-old executive had been granted, but that weren't yet vested, would immediately vest, bringing his heirs an additional $20.5 million.

The Fort Worth, Texas, company also would have owed $4.4 million in salary for its deceased employee. And his death would trigger a $158,400 payment listed as a "car allowance."

A spokesman for XTO didn't return calls seeking comment.

Continued: 'Grossly too high already'

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