Measured by stock performance, the health care segment was in intensive care during 2002. But going by our preferred measure -- return on equity -- these companies look like another instance of boards that pay dearly for a fair result. Of the 44 health care companies in the S&P 500, 20 handed out $10 million-plus in compensation to their chief executives. Fourteen of the 100 highest-paid CEOs in the S&P 500 come from this group, including Pfizer's ( PFE) Henry McKinnell, who netted $33.9 million in pay, bonus and options, and Tenet Healthcare's ( THC) under-the-gun chief Jeffrey Barbakow, who reaped $32 million in 2002 as his company's stock skidded 58%. Pfizer devotees would be quick to point out that some CEOs earn their keep more than others. And today's ROE v. Paid: Health Care chart drives that point home. As part of TheStreet.com's coverage of executive pay, the ROE v. Paid charts compare a company's average return on equity -- or ROE, a handy guide to how effectively a CEO puts shareholder money to use -- over the past five years with the chief executive's compensation. For compensation, we used the most recent figures provided by Aon Consulting's eComp Database -- the numbers include salary, bonus and options. (For more on our series, please read
this column .) ROE is also a good way to gauge a company's performance against its competitors. Amgen ( AMGN) and Biogen ( BGEN), as the chart shows, have posted five-year ROE well above their biotech peers. Using 15% average ROE as an unofficial bar for solid performance, the chart shows 27 of the 44 health care companies in the S&P 500 made the cut. Based on stock performance, 2002 was a tough year: Only nine of the 44 companies posted positive returns -- the chart includes stock returns as well. How did chiefs at Johnson & Johnson, Medtronic, Abbott Labs and elsewhere stack up? Check today's chart.
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|Here's to Your Wealth |
Of the 44 health care stocks in the S&P 500, 13 CEOs rank in the top 100 in executive compensation. Meantime, only nine stocks had positive returns in 2002, while 27 firms had five-year average ROE above the 15% mark. There are some hefty payouts among ROE laggards, including Tenet. When 2002 figures weren't available, previous-year figures were used, indicated by (2001) in the compensation column.
|Company (Ticker Symbol)||5-Year ROE||1-Year ROE||Chief Executive Compensation* Rank in 500 Richest CEOs in 2002||Stock Return in 2002|
|Zimmer (ZMH:NYSE)||86%||115.87%||J. Elliot $7,048,571 #300-400||36%|
|IMS Health (RX:NYSE)||68.9||120.79||David Thomas $4,671,703 #400-500 (2001)||-18|
|Eli Lilly (LLY:NYSE)||47.3||35.22||Sidney Taurel $9,492,639 #200-300||-19.1|
|*Compensation figures were not available from eComp, so Yahoo! figures were used. |
Source: TheStreet.com, Bloomberg, eComp Online, Yahoo!