Thursday, August 20, 2015

Exorbitant Compensation

According to the August 10 issue of Modern Healthcare, the top ten compensation amounts for healthcare executives in 2013 ranged from 3.6 million to 8.4 million.  Then the August 18 issue of The Boston Globe included an article about CEO salaries in Massachusetts teaching hospitals, all of which were well into seven figures, the highest quoted for the full year of 2013 being 2.6 million.

Spokespersons quoted attributed these salary levels to competition and market forces.

I don’t believe that.  I have yet to read of a healthcare CEO being paid in the millions being attracted to another job by more pay. 

I think what we are seeing is a social mechanism that has gone off the rails.  I think what has happened is that compensation committees of boards of trustees started using consultants and that those consultants found that the way to become popular was to find ways to justify high compensation levels.  Boards are populated in large part by CEOs of other organizations who are typically overpaid themselves and find it easy to adopt those consultants’ recommendations.

The thing has gotten out of hand and nobody as yet has found a way to bring it back under control.  There are some indications of popular discontent over these exorbitant salary levels, but so far it doesn’t seem to be having much effect.

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