The ‘Golden Coffin’ Deal
“Waste not, want not,” your mother used to say. But in some corners of corporate America, waste seems to have found a home.
Company officers spend millions redecorating already lavish offices; executives are paid huge sums to relocate, only to quit their jobs a few months later; company executives are given massive bonuses to sign employment contracts so favorable that they would be crazy to pass them up.
Even in this environment, compensation experts say Occidental Petroleum’s $25 million in posthumous payments to Armand Hammer stand out.
When the 92-year-old industrialist died last December, it triggered an employment agreement that required a series of payments to trusts and foundations set up for Hammer’s heirs.
Occidental, already in litigation over a variety of expenses made at Hammer’s behest, was forced to write an $18,291,579 check to the Armand Hammer Foundation. Another $4.6 million was paid to the Armand Hammer Living Trust.
Add another $1.9 million in miscellaneous “benefits” payments, $12,025 in vested employer contributions to Hammer’s savings plan and $316,442 from “the senior executive supplemental benefit program,” and Hammer’s posthumous payments amount to $25,106,046. That’s just the cash.
Restrictions on a 62,712-share grant of stock lapsed when Hammer died. At recent market prices, that grant was worth $1.2 million.
Hammer also earned a $1,487,326 salary in 1990 and a $920,000 bonus, which Occidental felt compelled to note in its proxy statement was “awarded before his death.” In total, Hammer’s estate, foundation and trust received a whopping $28.7 million.
How does that compare to Occidental’s 1990 profit? There’s no comparison because the West Los Angeles oil firm lost $1.7 billion last year.
“With that employment contract, I can tell you that God is not on the side of Occidental shareholders,” said Graef Crystal, a professor at UC Berkeley and a pioneer of pay-for-performance plans. “By calling Armand Hammer to his bosom, He cost Occidental shareholders quite a bit of money.”
Occidental defended the agreement in the past, noting that Hammer made tremendous contributions to the company and U.S. industry.
Nevertheless, compensation experts maintain that Hammer’s compensation deal may spawn a new business term for such a heavenly take: The Golden Coffin.
