Kohn: Lots of people look at "excess" in different ways. It's really not just a matter of the number of zeroes in an amount. As we pointed out in our package, it's plausible to defend even a very large package if the CEO has produced for shareholders. The executives who have been held out as "poster children" have usually been those with both very large packages and questionable performance. One of those, of course, has been Michael Eisner of Walt Disney. Dennis Kozlowski of Tyco actually produced good results, but questions over how he got his money became the basis of his two criminal trials, and the micro examples of his personal excesses made for great copy. Shareholders have used their increasing power in recent years as a check and balance of compensation excess. Eisner is no longer CEO; Kozlowski is on trial; and the CEO of Delta Air Lines stepped down in large part over criticism of his pay package. So it's getting harder for CEOs to break the bank.
Kohn: That's certainly the argument many of these nonprofit medical organizations would make. There's no doubt that a modern hospital or healthcare system is a very complex enterprise and that -- as in the for-profit world -- there are only so many people capable of overseeing something of that scope. Supply and demand almost commands that the price goes up for someone possessing those skills. Of course, there are those who argue that the board of directors, rather than the CEO, is the fund-raising arm of a nonprofit organization. If you follow that argument, then the CEO is not really bringing in the money. That doesn't make the job any less difficult, but it does undercut the argument of the CEO deserving a piece of the pie.
John Stevens, Towson: The story mentions that a third of the CEOs in the report got pay raises over 40%. Has there ever been any effort to regulate chief executive pay raises to bring the percentages more in line with those of the average worker?
Kohn:I'm not sure anyone is any more interested in regulating CEO pay than in regulating the pay of either of us. Rather than the pay itself, the regulatory requirements have gone toward disclosure. Companies have to disclose not just the amounts their CEOs are being paid, but in what forms and, more recently, why. The why is a matter of better corporate governance to some extent, but more a matter of companies needing to show that pay over $1 million a year is tied to performance. Companies need to do this in order to justify deducting those amounts as business expenses.
Randy Foster, Baltimore: What's the most creative -- or curious -- executive perk you found in your reporting?
Kohn: That's a great question, Randy. There's certainly a lot of creativity out there.
I can't say we combed through every single proxy looking for that, but our folks do point out a couple of highlights. The CEO of Foundation Coal was reimbursed for his legal fees in negotiating his own employment contract. And Broadwing Corp. paid more than $330,000 in moving expenses for its chief financial officer.
Karen Trendler: Out of curiosity, are there any women on your executive compensation lists?
Kohn: Yes, there are two, both CEOs of suburban D.C. biotech companies: Martine Rothblatt of United Therapeutics and Kathy Ordonez of Celera Genomics. Rothblatt in particular is a fascinating study in overcoming gender barriers/politics: She is a transsexual (about which she has been quite public.) As a man, Rothblatt was a very well-known telecommunications lawyer and entrepreneur who helped start, among other companies, Sirius Satellite Radio, before undergoing a sex-change procedure in the early 1990s and turning her professional energies to finding a cure for her daughter's rare illness. Ordonez several years ago was given the huge challenge of succeeding genomics research icon Craig Venter and turning his discoveries into marketable products.
Anonymous: What about the Maryland Hospital Association and MedChi?
Kohn: Trade groups and similar types of associations don't fall under the IRS category 501c3, which is where we focused our research. The vast majority of nonprofits in Maryland do fall under that category, and information for them is much more widely, consistently and currently available for those types of organizations than others.