The current compensation set by the board of directors of JP Morgan Chase for CEO Jamie Dimon, $20 million a year, has attracted some attention (e.g., see this commentary by Matt Taibbi), especially given the contrast between his raise and the $20 billion or so the company had to pay out last year in settlements of allegations of unethical practices. A New York Times opinion piece rushed to Mr Dimon's defense
in the world of executive compensation, especially when viewed from the rarefied perspective of other chief executives, and more broadly on Wall Street, Mr. Dimon’s pay — and how it was determined — is not only defensible, but laudable.
I spoke this week to several people with direct knowledge of the board’s discussions about Mr. Dimon’s pay. They said that the compensation committee went through an exhaustive process to determine the right level and that the board considered the likely negative reaction. 'We were mindful of it, but it didn’t influence our decision,' said one, who like the others, spoke only on condition of anonymity. 'Some people were going to criticize us unless we paid him nothing. We were trying to do the right thing.'
The author did conclude with a quote from Rep Peter Welch (D - Vermont),
This isn’t really about Jamie Dimon. It’s about a whole culture of immunity for the consequences of your actions.A Retired Pharmaceutical CEO Who Also was Hugely Compensated Despite his Company's Troubles Set Dimon's Pay
We have frequently discussed how the culture of immunity, or impunity found in finance may carry over into health care, since now many extremely rich leaders of finance firms sit on boards of trustees of health care institutions like hospitals and hospital systems, universities and their associated medical schools and teaching hospitals, and health related foundations, and boards of trustees of health care corporations.
In this case, maybe the culture carried over from health care to finance.
The NY Times article noted
The compensation and management development committee of JPMorgan Chase’s board has three members, all seasoned business luminaries in their own right. Lee R. Raymond, the chairman, is the former long-serving chairman and chief executive of Exxon Mobil. Stephen B. Burke is chief executive of NBCUniversal. William C. Weldon is the former chairman and chief executive of Johnson & Johnson.
Mr Weldon is the former pharmaceutical representative who rose to CEO of giant pharmaceutical/ biotechnology/ device company Johnson and Johnson. Despite the appellation of business luminary above bestowed by the author of the NYT article, we noted here how many settlements have been made by, fines assessed against, and other adverse legal actions affecting Johnson and Johnson in the recent past. Our lengthy summary of such cases is appended at the end of this post.
Yet Mr William Weldon, the outgoing CEO on whose watch most of the misbehavior resulting in the legal actions listed in the appendix below occurred, retired with a huge retirement package, after receiving extremely generous compensation prior to that. The retirement package was estimated to be worth from $143 to $197 million (look here). In 2010, his total compensation was $29 million (look here). According to the 2012 Johnson and Johnson proxy statement, his 2011 total compensation was greater than $26 million. As far as I can tell, Mr Weldon never suffered any negative consequences for his company's sorry record, and retired a very rich man.
Yet the luminous Mr Weldon got to make the decision about how much to pay Mr Jamie Dimond after his company's recent sorry record.
So it appears that the top hired executives of health care and finance organizations, and the so-called stewards sitting on their boards of directors are all blending together. Together they are in charge of assuring that top hired executives get richer and richer even while the companies they lead commit seemingly endless strings of ethical and sometimes legal offenses.
Is this any way to run health care, or the economy?
As I have repeated ad nauseum,
These leaders seem to have become like nobility, able to extract money from lesser folk, while remaining entirely unaccountable for bad results of their reigns. We can see from this case that health care organizations' leadership's nobility overlaps with the supposed "royalty" of the leaders of big financial firms, none of whom have gone to jail after the global financial collapse, great recession, and ongoing international financial disaster (look here). The current fashion of punishing behavior within health care organization with fines and agreements to behave better in the future appears to be more law enforcement theatre than serious deterrent. As Massachusetts Governor Deval Patrick exhorted his fellow Democrats, I exhort state, federal (and international, for that matter) law enforcement to "grow a backbone" and go after the people who were responsible for and most profited from the ongoing ethical debacle in health care.
Again, true health care reform would make leaders of health care organization accountable for their organizations' bad behavior.
- A guilty plea for misbranding Topamax in 2010
- A guilty plea for marketing Risperdal for unapproved uses in 2011 (see this link for all of the above)
- A guilty plea to misbranding Natrecor by J+J subsidiary Scios (see post here)
- Also in 2012, Johnson & Johnson was fined $1.1 billion by a judge in Arkansas for deceiving patients and physicians again about Risperdal (look here).
- Also in 2012, Johnson & Johnson announced it would pay $181 million to resolve claims of deceptive advertising again about Risperdal (see this post).