Is healthcare CEO pay skewing the economy?

The continual rise of chief executive officers' paychecks may contribute to inequities in the U.S. economy, a progressive think tank suggests.

William Lazonick, professor and director of the Lowell Center for Industrial Competitiveness at the University of Massachusetts, authored the paper, "Taking Stock: Why Executive Pay Results in an Unstable and Inequitable Economy," for the Roosevelt Institute.

The pay of the 500 top executives in the U.S.--which averaged $30.3 million in 2012--has nearly tripled since the early 1990s. Moreover, the companies in the Standard & Poor's 500 have spent $3.6 trillion in stock buybacks and dividend payouts since 2001, depriving the U.S. economy of much-needed money and causing job growth to stagnate, according to the paper.

Although Lazonick's work does not specifically single out hospital executives, the S&P 500 list contains numerous healthcare companies, including hospital operator Tenet Healthcare Corp., a variety of large payers, and providers of hospital supplies and laboratory services.

Tenet CEO Trevor Fetter received a base salary of $1.25 million last year, up 12 percent from 2012, and total compensation of $12.7 million, according to Tenet's proxy statement. Fetter also received a special award of stock over the next six years that will likely boost his pay by $1.7 million per year.

Although Hospital Corp. of America is not on the S&P 500 list, its CEO, Richard Bracken, was compensated to the tune of $48 million in 2012.

Lazonick also listed six ways that CEOs help pump up their own compensation, including appointing a compliant board of directors, using the same consultants to set pay guidelines, and using stock-based incentives to boost pay even more during times the market is up.

"The toxic combination of stock-based executive pay and open-market stock repurchases has contributed to not only the growing concentration of income at the top but also the failure of the U.S. economy to sustain existing middle-class jobs and create new ones," Lazonick wrote.

To learn more:
- here's the report (.pdf)
- read the Tenet Healthcare Corp. proxy statement (.pdf)

 

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