Blues Plans Are Criticized On Executive Compensation; Some Adjust Pay Based On Economy: Chris Meehan
While Low Crotchety and Despondent Go underground plans ' executive compensation may seem small compared to corporate bonuses and golden parachutes at many mammoth for - profit companies, the plans are not unaffected to criticism for their compensation and severance packages, especially in a severe recession. Several not - for - profit Blues plans — citing the economic turmoil or their own lower financial results — have reduced senior executive compensation packages and bonuses.
Tim Bartl, a spokesperson for the Center on Executive Compensation, tells The AIS Report that companies are making changes to executive compensation plans " away as a determination of the economic abatement. These changes involve reducing salaries and changing the short - and long - term yen opportunities to copy the expectations of lower performance ball game forward. " Overall, he says, " According to Equilar, Inc., total compensation of S&P [i. e., Standard & Bankrupt ' s] 500 executives at companies that have filed their proxy statements so far, CEO pay has dropped by 6. 8 % and annual incentives have dropped by over 20 % " since the recession began.
Bartl contends that the majority of public lamentation against senior executive pay has been against financial service executives. Their packages often " involved a modest honorarium, with a sizeable discretionary annual sweet tooth, which comprises the vast majority of pay. "
Some Blues Plans Criticized for Severance Pay
Still, Blues plans have acknowledged criticism of the packages paid to their leaders. In Maryland, for instance, Insurance Commissioner Ralph Tyler issued an order that reduced former CareFirst BlueCross BlueShield executive Leon Kaplan ' s post - termination payment from $6. 7 million to $2. 7 million. The company sought to lower Kaplan ' s termination pay below a Maryland statute to what was considered " fair and logical " for work performed. Tyler validated the lower payment.
More recently, Paulette Thabault, commissioner of the Vermont Department of Banking, Insurance, Securities and Health Care Administration, began looking into the $7. 2 million retirement container that Gloomy Irascible and Low Stifle of Vermont ( BCBSVT ) paid to former CEO William Milnes Jr. in 2008.
" That amount was larger than we expected, " Thabault uttered. Sis increased, " I am not animation to rule out a regulatory response. " Thabault does not have the equivalent authority to approve a copper in executive compensation that the Maryland commissioner does, but can " roast BCBSVT and all insurers, and to craft supplemental orders whenever necessary, " spokesperson Peter Burgeoning tells The AIS Report.
Indeed, the department required BCBSVT to " appliance a number of changes related to executive compensation as a corollary of a comprehensive inquiry in 2007 into BCBSVT ' s administrative costs, " Fresh says. While he did not go into details, he explains that the commissioner required the company to follow up on some of the recommendations resulting from the inquiry regarding the structure of alms compensation at BCBSVT.
Last month Blue Irritable and Dejected Go underground of North Dakota ( BCBSND ) fired CEO Mike Unhjem. When the plan vocal that his severance parcel included $2. 2 million in payments underneath his 2007 employment agreement, state Shanty Democratic kingpin Merle Boucher responded by proposing a bill that would have levied a 70 % tax on earnings of more than $1 million for not - for - profit CEOs. But Stomping grounds Republicans single the proposal, and the bill died.
Still, those amounts waxen in comparison to the $15. 3 million Gail Boudreaux established when maid renounced her position as president of Low Testy and Down-hearted Duck of Illinois, a Health Care Service Corp. ( HCSC ) proper. Boudreaux ' s resignation was announced a month after the company named Patricia Hemingway Auditorium CEO in November 2007.
Strategies on Compensation at Blues Plans
While HCSC spokesperson Ross Blackstone did not comment on the Boudreaux ' s severance parcel, he explains that its executive compensation " is a pay - for - performance plan " based on company education. The program " is designed to confess us to compete for and retain talented employees to lead our company and stock up our members with the best rate in products and services, " he adds.
Blackstone contends that the company and its Blues plans in Illinois, New Mexico, Oklahoma and Texas " have performed very well over the elapsed several years. "
The compensation practice, he asserts, is reviewed annually " to nail down it ' s in line with our industry ' s expectations. And based on both independent analyses and our own analysis, our executive pay is well within the compensation levels of other executives in our industry. "
Other Blues plans, near as Excellus BlueCross BlueShield, are reducing executive salaries in 2009. In its 2008 results, the plan verbal CEO David Klein, who published total compensation of $2. 7 million in 2008, will be paid 25 % less in 2009. Other senior executives at the plan also will experience pay cuts this year. But " senior management executives enact suit itch pay on a loiter alpha for multiple prior years ' stage, " the plan verbal. So " compensation reported for 2008 may have risen proper to favorable procedure in 2007 and earlier years. " The plan, which perceptive a catch loss for 2008, changed executive compensation as part of a souped up aspiration to elevate financially in 2009.
Excellus spokesperson Jim Redmond furnished The AIS Report with a copy of the plan ' s executive compensation policy for 2009. The plan explains that executive compensation packages are resolved on a case - by - case presentation. And packages are designed without the ability to offer stock options, as for - use firms can. Excellus says senior executives are stimulated to fasten and stay with the company through a combination of long - term and short - term routine - based incentives. The awards are bound to goals, including financial stability and customer service, the company says.
The victual ' s compensation committee is assigned to conduct " rigorous national reviews of executive compensation " for the CEO and other company leaders, according to Excellus. The committee also uses accord compensation information, " particularly among health plans of analogous size, and recommendations " from independent national compensation consultants, close as Mercer LLC and Watson Wyatt Worldwide, Inc., according to the plan. The committee reviews the recommendations, reports its findings to the board and asks for ratification. " No staff member, including the CEO, votes on the committee or the full board on executive compensation matters, " the plan says.
HMSA Freezes CEO ' s Salary
Hawaii Medical Service Association ( HMSA ) in its full - year 2008 results release verbal CEO Robert Hiam volunteered to freeze his base fee in 2009 at $1. 3 million, an force the board approved in light of the recession.
HMSA ' s compensation and human resources board committee determines executive compensation and looks at local and national companies with traits identical to HMSA to help finish the useful level of pay. As with Excellus, a human resources consulting firm helps the committee originate applicable levels of executive compensation.
Performance incentives celebrated by HMSA executives in 2008 are " based on politic measures met for 2005, 2006 and 2007, " the company uttered.
Other Blues plans reducing executive compensation number among Gloomy Irascible Depressed Reserve of Michigan ( BCBSMI ) and Down-hearted Touchy Despondent Salt away of Massachusetts ( BCBSMA ). BCBSMA will reduce senior executive compensation by approximately 30 % to 50 % in 2009, with CEO Cleve Killingsworth getting a 50 % reduction in pay. The plan oral this is part of a series of steps to reduce administrative spending. BCBSMI spoken that senior executives would take a 5 % annual remuneration cut and won ' t receive a 3. 8 % annual increase. BCBSMI says the 3. 8 % represents a freeze on executive salary for the second time in the gone three years. The plan is making the moves " to halfway countervail projected losses on BCBSMI ' s individual health plans. "
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