Healthcare News & Insights

Why healthcare execs should be counting their blessings

A recent study examined how large company CEOs were compensated in fiscal year 2011. Guess what it found out about healthcare executives?

They experienced the largest increase (7.8%) in 2011 — more than any other sector tracked in The Wall Street Journal/ Hay Group 2011 CEO Compensation Study.

Not too bad — seeing as healthcare executives garnered the smallest pay increase in 2010.

According to the study, net income of healthcare companies only rose 1.1%. However, one-year total shareholder return had a big leap of 9.8%.

Across the board

In its fifth year, the annual study looked at the primary elements of compensation for CEOs of the 300 largest U.S. companies, which included for-profit hospital operators.

Here’s what the study revealed across all of the sectors:

  • CEO pay only rose a meager 2.8% in 2011 to $10.3 million — in 2010 it jumped 11%
  • Base salaries grew 1.5% to $1.2 million
  • Annual incentives were flat ($2.3 million), yielding no increase in overall median cash compensation at $3.6 million
  • Long-term incentives increased by 5.5% to $7 million, and
  • Long-term grants — in the form of stock options exercises and the vesting of restricted stock and long-term cash plans — rocketed up by 34% ($4.3 million in 2010 to $5.6 million in 2011).

What’s in store for 2012?

The focus for 2012 is expected to be similar to 2011.

“We expect the focus for 2012 to remain on aligning pay and performance; however, the long-awaited rules on several provisions of the Dodd-Frank Act will likely result in additional changes to both pay plans and company disclosures,” said Irv Becker, national practice leader of the U.S. Executive Compensation Practice at Hay Group. “Long-term, we expect to see fewer features of executive pay programs that companies can’t easily rationalize to their shareholders.”

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