De­ferred com­pen­sa­tion fu­els pay in­creases for as­so­ci­a­tion ex­ec­u­tives

De­ferred com­pen­sa­tion con­tri­bu­tions help drive ro­bust in­creases in over­all ex­ec­u­tive pay, mask­ing a de­cline in base salaries

Modern Healthcare - - Modern Healthcare - Joe Carl­son

W hen CEOs con­sider the re­sults of the Mod­ern Health­care an­nual as­so­ci­a­tion ex­ec­u­tive com­pen­sa­tion sur­vey, which finds to­tal com­pen­sa­tion for top ex­ec­u­tives grew rapidly in 2008, they might want to keep one num­ber in mind: 65%.

That’s the per­cent­age of Amer­i­cans who hold an un­fa­vor­able opin­ion of U.S. cor­po­rate bosses, as re­ported by a re­cent Bloomberg Na­tional Poll. For com­par­i­son, that’s within the mar­gin of er­ror of the per­cent­age of Amer­i­cans hold­ing mem­bers of Congress in dis­re­gard, ac­cord­ing to the same poll.

So it is per­haps not dif­fi­cult to pre­dict how many Amer­i­cans, in­clud­ing as­so­ci­a­tion mem­bers, would view the news that the top ex­ec­u­tives at 52 not-for-profit as­so­ci­a­tions re­lated to the health­care in­dus­try re­ceived av­er­age in­creases of more than 20% in their to­tal com­pen­sa­tion pack­ages.

This, dur­ing a re­ces­sion­ary year when rev­enue at those same or­ga­ni­za­tions was sta­tis­ti­cally flat, ac­cord­ing to the re­sults of the sur­vey.

But a more de­tailed look at the re­sults, made pos­si­ble by the first year’s worth of new data on the greatly en­hanced tax-dis­clo­sure forms—the In­ter­nal Rev­enue Ser­vice’s Form 990—shows that ex­ec­u­tives and their boards might not be as tone-deaf to pub­lic per­cep­tions of their salaries as would ap­pear from the re­sults of the sur­vey.

Al­though to­tal com­pen­sa­tion did in­crease, av­er­age base salaries ac­tu­ally de­creased by 9% dur­ing fis­cal 2008—the most re­cent year of data avail­able—leav­ing many ex­perts to con­clude that changes in the tax forms and the new ways that com­pen­sa­tion is ac­counted for have led to many of the ap­par­ent fluc­tu­a­tions in com­pen­sa­tion seen in the forms.

“The board mem­bers live in the com­mu­nity, and you can’t help but be im­pacted by the per­cep­tion of ex­ec­u­tive pay,” says Jim Nel­son, a man­ag­ing prin­ci­pal in the Minneapolis of­fice of ex­ec­u­tive com­pen­sa­tion firm Sul­li­van, Cot­ter & As­so­ci­ates. “The is­sues con­tinue to be trans­parency, full dis­clo­sure, sim­ple dis­clo­sure of pay and the pub­lic per­cep­tion im­pact on pay.” The re­sults of the ninth an­nual Mod­ern

Health­care as­so­ci­a­tion ex­ec­u­tive com­pen­sa­tion sur­vey might at first seem to show that to­tal com­pen­sa­tion just for the 2008 tax year rose at a rate more than dou­ble the pre­vi­ous year, 23% in 2008 com­pared with 10% in 2007.

A closer look at the num­bers

Av­er­age to­tal com­pen­sa­tion among the top ex­ec­u­tives at the 52 as­so­ci­a­tions whose tax forms were in­spected by the mag­a­zine rose to $921,644 from $730,282 the year be­fore. Sev­eral of the ex­ec­u­tives saw large per­cent­age in­creases in their to­tal com­pen­sa­tion pack­ages, though some of those were at­trib­ut­able to ac­count­ing changes or com­par­isons with par­tial-year salaries. In­dus­try ex­perts noted that al­though such not-for-profit as­so­ci­a­tions are viewed by the pub­lic as char­i­ties be­cause of their tax-ex­empt sta­tus, board mem­bers typ­i­cally base com­pen­sa­tion rates on the salaries in com­pa­ra­ble in­dus­tries. In the case of this group of in­dus­tries, the most com­monly cited com­pa­ra­bles were hos­pi­tal C-suites and lob­by­ing in­dus­tries, both of which are well-com­pen­sated ar­eas for ex­ec­u­tives.

Eleven of the 52 ex­ec­u­tives for which 2008 data fig­ures were re­ported

Billy Tauzin, head of the Phar­ma­ceu­ti­cal Re­search and Man­u­fac­tur­ers of Amer­ica, tops this year’s rank­ing. This is the first year PhRMA was in­cluded in the sur­vey.

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