* For an explanation of the different approaches used by the AFL-CIO and the U.S. Securities and Exchange Commission to calculate total compensation, click here.

‘Golden Coffin’ Promises Shaw Group’s CEO Generous Death Benefits

Americans have lost nearly one-fifth of their household wealth in the past year, leaving many wondering about the legacy they will leave their children. But James Bernhard’s heirs are well taken care of. When the founding chairman, president and chief executive officer of the Shaw Group dies, the Baton Rouge, La.-construction giant will pay more than $40 million to his heirs through “golden coffin” benefits, including pay, stock awards, life insurance and health benefits.

Bernhard’s generous death benefits, which are spelled out in his employment contract, caught the attention of shareholders last summer.[1] Under this agreement, the Shaw Group would pay his family a year’s base salary and accrued bonus, valued at more than $1.8 million, and $264,000 in long-term incentive awards that would vest immediately.[2] Bernhard’s heirs also stand to collect $18.6 million in unvested stock options and restricted stock, $1.6 million in life insurance proceeds and $65,000 in health benefits for a year.[3] The grand total of all these benefits: $22.3 million.[4]

The most extraordinary aspect of Bernhard’s arrangement is the Shaw Group’s guarantee that it will pay his family nearly $18 million for him not to compete with the company for two years, even after he’s dead.[5] In 2007, when Shaw’s stock price was higher, Bernhard’s death benefits from the stock awards were even more valuable—and his family would have received a total of nearly $50 million.[6]

Shareholders questioned the need for these pay arrangements at the company’s 2007 annual meeting, with more than 60 percent supporting a proposal by the California Public Employees’ Retirement System to restructure and limit his pay package on his departure from the company.

In 2009, RiskMetrics Group, the influential proxy advisory firm, recommended that investors vote in favor of a proposal at the company’s Jan. 28 annual meeting that would require shareholder approval of death benefits to all senior executives. “Additional benefits provided upon death…do not reinforce the company’s pay for performance philosophy,” RiskMetrics noted in its Jan. 13 report on the Shaw Group. Two-thirds of Shaw’s shareholders supported the non-binding proposal.[7]  Shaw’s directors have not yet indicated whether they are listening.[8]