Public interest in ballooning CEO pay spiked recently, after the billionaire Republican presidential candidate Donald Trump called it “disgraceful” and “a total and complete joke.” Speaking to his populist base, he stressed the need for reinvigorating U.S. manufacturing but essentially argued that CEOs are already overpaid: “I know companies very well and the CEO puts in all his friends…and they get whatever they want you know because their friends love sitting on the board.”
Here at Qmed, we delved into corporate SEC filings to figure out which CEOs arguably get paid more than they should, comparing their pay to their company’s financial performance.
We ranked overall compensation for CEOs at 18 of the largest medical device companies publicly traded in the U.S. We then compared the compensation rank with a company performance ranking based on four factors: revenue growth, five-year stock performance compared to the S&P 500, earnings growth, and total revenue (as a control for size).
Here are the five CEOs whose compensation ranking was much larger than the company performance ranking .
1. Stephen MacMillan, Hologic
Compensation Rank: 4
Company Performance Rank: 18
Hologic provided MacMillan with generous awards to recruit him in December 2013, during the first quarter of Hologic’s fiscal year ended September 27, 2014. Much of the $24.5 million compensation the former Stryker CEO received came from $15.3 million in stock awards under MacMillan’s employment agreement.
It was slow going, however, under MacMillan’s initial leadership of the Bedford, MA–based diagnostic and medical imaging equipment maker. Revenue only grew 1.5% during the 2014 fiscal year, 14th among the 18 companies analyzed, and earnings of $17.3 million were less than 1% of revenue from the previous year—though it did mark a turnaround from the nearly $1.2 billion that Hologic lost during the 2013 fiscal year.
MacMillan, however, appears to be more than earning his keep this year. Hologic had the best performing stock among large medical device companies during the first nine months of 2015. Its stock value was up more than 45% during the time period. Hologic says it has been seeing accelerated adoption of its FDA-approved Genius 3D mammography systems. 3-D imaging is able to detect 41% more invasive cancers than standard 2-D imaging, according to Hologic.
2. Michael Mahoney, Boston Scientific
Compensation Rank: 11
Company Performance Rank: 16
While Michael Mahoney has helped turn around the performance of Boston Scientific, it comes as a cost. Mahoney is one of the best paid CEOs in the medical device industry. In 2014, he made $10,527,884—only slightly less than the tenth-highest paid medtech CEO Timothy Ring of C.R. Bard, who made $10,840,935.
Mahoney’s annual compensation has hovered in the $10–$12 million range since he took over the Boston Sci’s CEO post in late 2012.
In 2012, the Minneapolis/St. Paul Business Journal explained that Mahoney brought in nearly $12 million after working only 76 days after replacing retiring the then CEO Hank Kucheman. Most of the money from then until now comes from stock options.
For the company’s most recent fiscal year, he received total compensation of more than $10.5 million. Meanwhile, the company saw revenue grow 3.3% the same year, placing the company in the middle of the pack.
A person investing $100 in Boston Scientific stock at the end of 2009 would have had $147.22-worth of stock five years later—$57.92 less than if they had simply invested it in the S&P 500. It was one of the worst rankings for stock performance.
However, Boston Scientific stock has been showing improvement this year, up more than 26% in value for the first nine months of 2015. In fact, a report from Evaluate Medtech found that the company’s share price rose 34% in the first six months of the year—the biggest increase of any medtech company with $15 billion or more in revenue. Boston Scientific’s interventional cardiology business has played an important role helping to drive the company forward.
3. Miles White, Abbott Labs
Compensation Rank: 6
Company Performance Rank: 11
White’s $17.3 million in total compensation was actually down a bit during the fiscal year ended December 31, 2014; he received $20.9 million the year before. White’s option awards were valued at $4.6 million, a little more than half what he received the year before.
Company performance, however, does not seem to have kept up. Revenue was up only 3% during the year, and profits were down 11%. Abbott Labs comes in 11th for five-year stock performance compared to the S&P 500; it’s stock price was only slightly up during the first nine months of 2015.
4. Jeffrey Immelt, GE
Compensation Rank: 2
Company Performance Rank: 6
It makes sense that Immelt’s $37.3 million annual compensation would place him near the top of the list, especially since the industrial conglomerate General Electric is one of the largest companies in the world with $148.6 billion in annual revenues. Only $18.3 billion of that revenue came from GE Healthcare, but the amount still makes GE one of the largest medical device companies in the world.
Qmed controlled for revenue size in its company performance rankings, and yet GE still came in sixth. It was 13th for revenue growth and 13th for earnings growth, measured as a percentage of the previous year’s revenue.
GE Healthcare revenue in 2014 was only up 1%, to $18.3 billion, amid slow growth in developed markets outside the U.S.
5. Vincent Forlenza, BD
Compensation Rank: 9
Company Performance Rank: 12
Vincent Forlenza, CEO of BD is certainly a big name in the medical device industry and, last year, he was named chairman of AdvaMed’s board of directors. But if his company’s stock performer is treated as an indicator of his worth, he is earning slightly more than he should. Last year, he brought in $10,983,518 in total compensation. Meanwhile, the company was 15th when it came to five-year stock performance compared to the S&P 500, and its stock value was only up 1.3% during the first nine months of 2015. The company was seventh for revenue growth, but 10th for earnings growth.
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