Saturday, March 19, 2005

Generous CEO Compensation and Corporate Governance

Re some previous posts in which we noted that managed care CEOs who publicly champion cutting health care costs often seem to command disproportionately high personal compensation (e.g., see the posts here on United Healthcare and here on Harvard Pilgrim)....
The NY Times just ran a commentary by Nicholas Kristof about how exceedingly generous levels of CEO compensation seem to better correlate with corporate governance problems than with corporate financial performance. (Some of the scholarly articles he mentioned can be found here, by Grinstein and Hribar, and here, by Bebchuk and Fried.) One striking figure he mentioned was that public corporations now devote 10% of their total profits to the compensation of their top five managers, up from 6% in the 1990's. Also, "another study found that of the 1,000 largest companies, two-thirds claimed to have outperformed their peers. That's the 'Lake Wobegon effect': all CEOs in America are paid as if they were above average."
In that context, managed care CEOs with million dollar plus compensation packages berating physicians and patients for excess health care costs just adds insult to injury.

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