, Crain News Service
When a health care company's shares experience a free fall on the stock exchanges, it's not only bad news for shareholders. The company's executives take a hit too.
William M. Mercer has analyzed how executives at 56 investor-owned health care companies fared when the stock market was hammering their companies' shares. The results: pay packages flattened.
For the chief executive officers of the 16 largest investor-owned firms, the decline was abrupt. Their median total direct compensation, excluding options, plunged to $2.9 million in 1998 from $7.8 million in 1997. Such compensation for the top dogs, those at the 75th percentile in 1997, fell to $8 million from $14.8 million.
In 1998 health care CEOs' median total cash compensation -- defined as base salary plus bonus -- rose 5% to $725,000 from $690,000 in 1997. When long-term incentives were added, "the CEOs' total pay package at the largest health care companies actually declined, a rare phenomenon in the world of executive compensation," said Mercer consultant Marty Katz.
The total compensation package amounted to a median of $2.6 million, down 8% from $2.8 million in 1997.
The companies surveyed included such national giants as Beverly Enterprises, Columbia/HCA Healthcare Corp., HealthSouth Corp. and United HealthCare, as well as smaller regional firms, such as Omnicare, Trigon Healthcare and United Wisconsin Services.
To be included, companies had to have at least $300 million in revenues. The compensation data were drawn from proxy statements.
The median bonus, expressed as a percentage of base salary, was 29% in 1998 after having been 47% the year before. What's more, 38% of the firms declined to pay bonuses in 1998. To substitute for them, they raised base salaries or granted more stock options.
