John Hammergren is the CEO of McKesson, a large drug wholesaler, based in California. McKesson is a very profitable company, but certainly nowhere nearly as profitable as some of the largest US Corps.
From McKesson's Proxy Statement, filed with the SEC, here is Hammergren's Compensation disclosure.
| Three Year Total | ||||
| 2012 | 2011 | 2010 | 2010-2012 | |
| thousands of $s | thousands of $s | thousands of $s | thousands of $s | |
| Base Salary | 1,680 | 1,665 | 1,580 | 4,925 |
| Stock Awards | 8,602 | 12,186 | 11,049 | 31,837 |
| Option Awards | 6,133 | 7,371 | 7,648 | 21,152 |
| Non-equity Incentive Compensation | 12,828 | 9,860 | 12,828 | 35,516 |
| Increase in Pension Value | 10,075 | 14,073 | 20,672 | 44,820 |
| All Other Compensation | 363 | 512 | 566 | 1,441 |
| Total Compensation | 39,681 | 45,667 | 54,343 | 139,691 |
So when you combine his Stock Awards and Stock Option Awards they total a massive $53 mil for the most recent three years. And yes, the Value of his Pension also increased by another $45 mil in the most recent three years. You add just those two items and you get $98 mil of Compensation.
And yeah, the Stock and Stock Option Awards are a massive 10.8 times the base salary in the most recent three years.
When you ponder the above numbers, there is clearly a very extravagant situation here.
And when you analyze the details of the above All Other Compensation Category, included in the three year total of $1,441,000 are the company match to the 401(k) Retirement Plan of $34,000.....that seems very fair.....but also, two other items that seem extremely extravagant....another company match related to Other Retirement Plans totaling $800,201 and Security Costs totaling $533,196.
Clearly, the country's health care costs would be a lot better off if these extravagant costs were removed, and if McKesson lowered the drug prices that it charges by a like amount.
But another thing that bothers me here is why in the world should the US Government, and thus US taxpayers, be funding a good chunk of these extravagant costs? Specifically, McKesson is getting a 35% US Federal Income Tax Benefit for the tax writeoffs it receives eventually for the stock awards and for the stock option awards, upon exercise.
Thus, my recommendation here is for all Health Care Corps to have their US Federal Income Tax Benefit for all Stock Awards and Stock Option Awards be limited to a maximum 20% Tax Rate for all highly-paid employees with Total Compensation of more than $200,000 earned in the applicable year. And the money raised here by the US Government should be used as a downpayment on the country's huge health care cost problem.
Below here are the Salary and Stock Awards and Stock Option Awards Compensation Disclosures in the most recent Proxy Statements for mainly just the CEOs of the larger Health Care Corps.
| Ratio of Stock and | ||||
| 2011 | 2011 | Stock Option | ||
| Base | Stock and Stock | Awards | ||
| CEO | Corp | Salary | Option Awards | to Base Salary |
| thousands of $s | thousands of $s | |||
| Health Insurance Corps | ||||
| Hemsley | UnitedHealth | 1,300 | 7,000 | 5.4 |
| Braley | WellPoint | 1,144 | 10,000 | 8.7 |
| Bertolini | Aetna | 1,000 | 7,300 | 7.3 |
| Cordani | Cigna | 1,000 | 8,473 | 8.5 |
| Broussard (President) | Humana | 41 | 7,000 | 170.7 |
| Total Health Insurance Corps | 4,485 | 39,773 | 8.9 | |
| Hospitals and Health Services | ||||
| Bracken CEO (2010 Amounts)* | HCA | 1,325 | 24,985 | 18.9 |
| Johnson President (2010 Amounts)* | HCA | 850 | 16,502 | 19.4 |
| Hazen President (2010 Amounts)* | HCA | 789 | 11,809 | 15.0 |
| Thiry | DaVita | 1,050 | 12,057 | 11.5 |
| Miller | Universal Health Services | 1,400 | 6,849 | 4.9 |
| Smith | Community Health Services | 1,400 | 8,072 | 5.8 |
| Total Hospitals and Health Services | 6,814 | 80,274 | 11.8 | |
| Big Pharma | ||||
| Read | Pfizer | 1,700 | 12,601 | 7.4 |
| Weldon | Johnson & Johnson | 1,907 | 6,798 | 3.6 |
| Clark (Chairman) | Merck | 1,375 | 8,712 | 6.3 |
| Frazier | Merck | 1,500 | 6,108 | 4.1 |
| White | Abbott Labs | 1,900 | 11,596 | 6.1 |
| Andreotti | Bristol Myers Squibb | 1,510 | 7,352 | 4.9 |
| Lechleiter | Eli Lilly | 1,500 | 5,625 | 3.8 |
| Total Big Pharma | 11,392 | 58,792 | 5.2 | |
| Other Health Care | ||||
| Scangos | Biogen IDEC | 1,242 | 7,235 | 5.8 |
| Pyott | Allergan | 1,300 | 8,909 | 6.9 |
| Ludwig | Becten Dickinson | 1,093 | 6,363 | 5.8 |
| Solomon | Forest Labs | 1,350 | 6,038 | 4.5 |
| MacMillan | Stryker | 1,250 | 6,708 | 5.4 |
| Wasson | Walgreens | 1,296 | 8,919 | 6.9 |
| Starks | St Jude Medical | 1,025 | 4,482 | 4.4 |
| Merlo | CVS Caremark | 1,208 | 6,750 | 5.6 |
| Paz | Express Scripts | 1,116 | 7,200 | 6.5 |
| Martin | Gilead Sciences | 1,423 | 11,399 | 8.0 |
| Sharer | Amgen | 1,791 | 11,376 | 6.4 |
| Parkinson | Baxter | 1,409 | 8,486 | 6.0 |
| Ishrak | Medtronic | 1,168 | 21,221 | 18.2 |
| Hammergren | McKesson | 1,680 | 14,735 | 8.8 |
| Barrett | Cardinal Health | 1,277 | 8,000 | 6.3 |
| Johnson | Herbalife Ltd | 1,230 | 19,550 | 15.9 |
| Dvorak | Zimmer Holdings | 866 | 6,278 | 7.2 |
| Total Other Health Care | 21,724 | 163,649 | 7.5 | |
| Total all Health Care Corps | 44,415 | 342,488 | 7.7 |
* HCA's Stock and Stock Option Awards include the cash distributions on vested stock options and the amounts payable on unvested stock options.
Just focusing on the Big Health Insurance Corps above, when the total Compensation from Stock and Stock Option Awards is a massive 8.9 times the Total Base Salary, not only is this extremely extravagant, but it also drives the massive stock buyback programs that WellPoint, Aetna and UnitedHealth have.
By buying back so much of their stock, these companies' EPS is enhanced. Further, when they increase their number of shares bought back each year, their EPS growth is enhanced. And both EPS and EPS growth drive stock prices, which further enhances the wealth of the executives of these companies.
Presently, there is nothing that prevents these Health Insurance Corps from buying back as many shares as they want. I think there needs to be US Government legislation that prevents excessive stock buybacks.
Anyway, the total money raised by the US Government from the above recommendation should be used to reduce the US Debt. This is a far better way to solve the US health care cost problem than to substantially reduce Medicare and Medicaid Benefits.
