While ordinary workers struggle with mounting debt, piddling pay increases, vanishing pensions and dwindling health coverage, a new generation of tycoons has emerged, every bit as avaricious and shameless as the Gilded Age monopolists Rockefeller, Carnegie and Gould. In this Gilded Age redux, there is the same yawning gap between the wealthy and everyone else, but there is one critical difference: The new corporate titans dont actually have to do their jobs very well to earn their bounty.
As our July 30 compensation issue proves, a multitude of new disclosure rules aimed at teasing out all of the pay, perks and pensions granted to top executives has mattered scarcely a whit to the for-profit healthcare world. Compensation committees, made up of members of the same limo and private jet set as the CEOs, continue to act like drunken gamblers when it is time to ink a new contract with the chief.
Thus we find ourselves with the specter of the former head of UnitedHealth Group, William McGuire, slinking away under a cloud of legal suspicion over stock options worth as much as $1.6 billionwhich would be the biggest corporate payday ever. There is some good news: After severe criticism, the company capped his annual pension at $5.1 million.
At Tenet Healthcare Corp., poor Trevor Fetter is losing out on unexercised stock options because his companys performance and stock price have tanked amid continuing legal troubles. He will have to make do with just his $6.5 million paycheck. (His predecessor, Jeffrey Barbakow, took home $116 million in 2002, the same year Tenets Medicare fraud problems emerged.)
HCAs Jack Bovender led the effort to take his company private last year, and for his efforts he topped the list of healthcare tycoons at $36 million in total compensation. The buyout took place as earnings were falling by 27%.
Hank McKinnell, Pfizers chairman and chief executive, resigned last year with an exit package worth nearly $200 million, although the company lost more than $137 billion in market value during his six years at the helm. (His $6.5 million annual pension equals all of his salary and bonus while he was working.)
As Jose Pagoaga, a healthcare executive compensation consultant at Mercer Human Resources Consulting, told us: Market forces for executive talent are ultimately what drive compensation, he says. Regulators dont drive this issue.
Those market forces are as mysterious as they are powerful. It would seem to us that there is an abundance of talent out there, as hospital CEO turnover rates continued in the 15% range last year. Of course, we have seen evidence that many CEOs retire early, and no wonder. Why haggle with managed-care contracts or regulatory issues when you can cash in the stock options, get the golden handshake and the pension benefits and head for the golf course?
Still, with some of the perks, maybe staying put isnt so bad. You would think that earning $33 million a year would be enough to lure you to live near where you work, but Kent Thiry of DaVita needed $495,000 to fly from his home in San Francisco to DaVitas headquarters near Los Angeles each week.
The uninsured? The patient? Quality of care? What do these things matter when your driver shows up on time at your gated manse to drive you to your corporate jet from whence you can escape to your second home? No, dont trouble the burdened CEO with those piffles of daily life in healthcare. As the chief glances down at the little people from 35,000 feet, he is thinking strategically, probably about how to keep his personal good times rolling.