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    Health Care CEO's Lavish Pay Package Shows How the 1% Get Paid

    By Dashiell Bennett | The Atlantic Wire – Tue, Jan 3, 2012
    Health Care CEO's Lavish Pay Package Shows How the 1% Get Paid

    John Hammergren, the CEO of health-care giant McKesson Corp., made $46 million last year thanks to one of the most generous executive pay packages in his, or any other business. Gary Rivlin of The Daily Beast has a breakdown of some of the outrageous provisions that contribute to Hammergren's outrageous wealth including some figures that at least one compensation consultant calls "excessive." When someone whose job is to craft multi-million dollar pay packages for corporate CEOs thinks you're overpaid, you're probably overpaid. 

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    Hammergren is not the richest or even the highest-paid CEO in the world, but the structure of his compensation is raising eyebrows even in the already outsized world of the 1%. He took over McKesson, a firm that specializes in supplying presrciption drugs to pharmacies, in 1999 after a fraud scandal took out of many of the company's top executives. Since that time he's been paid nearly $500 million as the CEO and Chairman of the Board. 

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    His salary is a modest $1.66 million a  year, but he also gets annual cash bonuses of between $10 million and $13 million. His perks are many and lavish, including a company car and chauffeur, unlimited personal use of the firm's corporate jet, and a generous pension plan not available to rank-and-file employees. (Their pension program was canceled in 1997.) Last year, McKesson contributed $13 million to Hammergren's retirement fund, which if he walked away tomorrow, would be worth $125 million. 

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    Then there's the stock grants and options, a standard form of compensation at most corporations, but one that McKesson has used with reckless abandon. Hammergren owns $129 million in McKesson stock, plus another 1 million in options that have yet to vest. (In 2011, he received $12 million in stock and another $7 million worth of options in his pay.) Oh, but don't worry. According to Rivlin, the company paid him $483,000 last year to make up for the dividends Hammergren didn't earn because he doesn't own the stock yet.

    And then there’s a provision so outsize it’s drawn the attention of corporate-governance watchdogs like GMI, the research group that put Hammergren in the top spot of its latest survey of CEO salaries. If Hammergren loses his job due to a change in ownership, he receives an immediate $469 million payout, GMI found—giving him perverse incentive to see it happen.

    In other words, despite all the money that McKesson gives him each every year, Hammergren stands to make even more if he can find a way to sell the company to someone else.

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    Whether or not he's earning his keep is up to the shareholder to ponder, but Hammergren is also the Chairman of the Board. He may leave the room when they vote on executive pay, but he decides who was in the room — a group of guys who are pretty well paid themselves.

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    And if this little exercise in class warfare doesn't already fire you up, remember that McKesson also give Hammergren $17,000 a year to pay for financial planning services. Keeping track of all that money is an expensive undertaking.

     

    12 comments

    • Dan
      Dan  •  Chicago, Illinois  •  4 mths ago
      No pension for the workers(lost in 97) and yet this man earns hundreds of millons since that time, that is really sad. That money would boost the economy much more were it in the hands of the many employees as opposed to just ONE man.
      • Craig
        Craig 4 mths ago
        I wonder how much each employee would get if they just split up his pension contribution evenly among all of them. Depends on how many employees of course but it would still help most people even if its only like a $1,000 or something. I guess he needs to keep his life style up though in retirement. I wouldnt want him to live like the lower half of the 1% or something like that...
    • Brian
      Brian  •  4 mths ago
      We need single payer health care reform NOW. This is ridiculous and even shameful...to have no pension for workers and just a pension for the executives. Execs should be stripped of their pensions just like they stripped it from employees. I wonder if execs would like it.
    • Absolute Machine
      Absolute Machine  •  New Orleans, Louisiana  •  4 mths ago
      any one wonder why health care is so expensive
    • John
      John  •  Killeen, Texas  •  4 mths ago
      I am a free market guy and even I think this is over the top. The way in which Hammergren got his deal should be investigated as it is so good and contrary to the interest of the stockholders, that something smells fishy about the legality of how it came to be.
      • T
        T 4 mths ago
        How can the free market work for health care? The consumers don't know if they need the product (toncilectomy, chemo, digoxin, etc), they can't evaluate the quality of the product (who does the best c-section in your town?), and they don't know the price in advance.
    • Jacqueline
      Jacqueline  •  4 mths ago
      *shrug* Capitalism at it's finest. "McKesson Empowering Healthcare"
      • Jacqueline
        Jacqueline 4 mths ago
        But apparently not their workers with a pension.
    • Nobama for 2012
      Nobama for 2012  •  Austin, Texas  •  4 mths ago
      Let me see Congress and the Senate and your wonderful leader last year spended 4 BILLION dollars last year on #$%$ so who calling the kettle black......they spend more then all the CEO;s in the USA
      • bighitter64
        bighitter64 4 mths ago
        Spended???.......Lol. Obviously by your spelling you have no idea what is going on and you are a Huge Fox Fan.
    • Hollis L
      Hollis L  •  Lubbock, Texas  •  4 mths ago
      freeking ludacrous spending. this is why healthcare is in the toilet and costs are so dang high. all this is being passed on to the consumer in the form of higher costs of insurance and cost of daily stays in hospital. Thats a bunch of crap. Hell aspirin cost 15 dollars per to help offset the costs.
    • Craig
      Craig  •  Danbury, Connecticut  •  4 mths ago
      These people live in their own fantasy world. The 1% are the Kings and the rest of us are their peasants, some more higher class peasants than others, but peasants none the less. Anyways, I agree with repuiblicans, I think this guy needs a tax brake. Especially if it comes down between his tax break and some old lady's social security check or something. Hes a job creator. He cant create jobs unless he pays as little taxes as possible.
    • Hope
      Hope  •  4 mths ago
      So where's the outrage when Fannie & Freddie top execs reward themselves with lavish pay increases & compensation WHILE continuing to get billions in tax payer bailouts thanks to Obama. And why did the Dems leave out regulations for Fannie & Freddie from their Dodd-Frank Financial Reform?
    • Allan
      Allan  •  Charlotte, North Carolina  •  4 mths ago
      Even as this article puts Hammergren in the spotlight, the article also should make us all wonder why the basic and truly devastating truth is soft pedaled and underplayed! And my conclusion is that members of the 10% - of which Daniel Bennett is likely a member - all still aspire to the American dream in the only place it still exists.

      Read the second to the last paragraph - and therein is the awful truth. Executive compensation is totally out of control - and the hen house is guarded by the wolves. The rich enrich their buddies in a circle jerk of compensation studies in which it simply pays well to award your buddies outrageous and incomprehensible salaries. Then when your salary is compared, there's justification for a raise.

      And it is consequential that Hammergren draws his salary out of our health care costs - and about which Obama care is silent.
    • T
      T  •  Waxahachie, Texas  •  4 mths ago
      "Obamacare" requires that insurance overhead not cost more than 20% of premiums...but 4 states have gotten exemptions on this since they just can't get it down to under 35%.
    • T
      T  •  Waxahachie, Texas  •  4 mths ago
      In Germany 1.5% of money spent on health care is wasted in paying for the payment system.
     Post a comment
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