Healthy Skepticism Library item: 12632

Warning: This library includes all items relevant to health product marketing that we are aware of regardless of quality. Often we do not agree with all or part of the contents.

Publication type: news

Goldstein J.
SEC Chides Bristol-Myers, Boston Scientific & Baxter on Pay
The Wall Street Journal 2008 Jan 29
http://blogs.wsj.com/health/2008/01/29/sec-chides-bristol-myers-boston-scientific-baxter/

Full text:

The SEC has been pushing companies to cough up more details about how they set top executives’ pay. Among the long list of companies the commission’s been in touch with are a few big health players, including Bristol-Myers Squibb, Boston Scientific and Baxter International, the WSJ reports.

The SEC is none too happy with most of the responses, according to the WSJ, though the article doesn’t specify which companies the commission thinks are still playing it too close to the vest.

But in some of the cases that are closed, we can get a few more details on the back and forth about comp. Here’s a rundown on the health-care heavy hitters.

The SEC letter to Bristol’s Jim Cornelius asks for more info about “long-term target values are being increased by 50% for EVPs and 25% for others.” And it asks for more information about specific compensation deals with several execs, including Cornelius.

Bristol’s response says the big increases brought the execs’ pay up to be in line with the “market median” (the pay midpoint among Bristol’s “peer companies”). It also notes that Cornelius’ pay follows a similar, peer-based model.

The letter to Boston Scientific CEO James Tobin says the company needs to provide “substantive analysis and insight into how the committee determined the specific payout amounts.” And the company should give details about how difficult it will be for executives to meet targets that affect their compensation, how termination agreements were determined and what goes into its “executive allowance,” the SEC said.

We were especially intrigued by the “executive allowance” (who doesn’t like an allowance?), which Boston Scientific described in its response to the SEC as “a lump sum cash payment that we make to our executive officers in lieu of other perquisites typically paid by other companies. Amounts are not specifically allocated to any particular perquisite(s) and we do not specify or track how each executive officer chooses to spend his or her allowance.”

In a letter to Baxter CEO Robert Parkinson, the SEC writes that it “would expect to see a more detailed discussion and more thorough analysis of each element of compensation.” The letter goes on to lay out lots of specifics about things such as financial metrics, executive pay incentives and how the compensation committee came up with specific dollar amounts.

In its response, the company said it would “in future filings provide additional discussion and analysis of the elements of compensation including with respect to cash bonuses and long-term incentives.”

Health Blog Questions of the Day: Which health-care companies do you think should be queried about executive comp? What would you ask?