What is a Golden Coffin?
A golden coffin is slang for the portion of an executive contract that goes into effect should the executive die.
How Does a Golden Coffin Work?
For example, let's assume that John is the CEO of Company XYZ. He earns $2 million per year, has company-provided health insurance, gets a bonus every year, and has several million dollars worth of Company XYZ stock options that aren't quite vested yet. When he was hired, he negotiated a golden coffin clause in his employment contract.
John dies suddenly in a car accident. Per the golden coffin language in his employment agreement, John's heirs receive the salary and bonuses he would have earned through the end of his contract and they receive all of his stock options, which are now accelerated and therefore vested, as well as any proceeds from any life insurance policies that Company XYZ provides to employees.
Why Does a Golden Coffin Matter?
Golden coffins ensure that an executive's compensation package continues to benefit his or her heirs after his death. Critics often claim that golden coffins are egregious and too expensive. Supporters often argue that golden coffins help retain talent.