Last August, Jamelle Brown, a technician at Research Medical Center in Kansas City, Missouri, contracted Covid-19 while on the job sanitizing and sterilizing rooms in the facility’s emergency department. Luckily, his case wasn’t severe, and after having quarantined, he was back at work.
Upon his return, Brown was named Employee of the Month in his unit and given a gift voucher for use in the hospital cafeteria. The amount: $6.
“That stung me to the bone,” said Brown, who makes $13.77 an hour and has worked for almost four years at the hospital, owned by the corporate giant HCA Healthcare. “It made me sit back and say, ‘This place doesn’t care for me.'”
Research Medical’s owner, HCA Healthcare Inc., is a profitable, publicly traded network of 185 hospitals and 121 freestanding surgery centers in 20 states and England. Even in the year of Covid-19, 2020, the company generated $51.5 billion in revenue and increased its pretax earnings by 3.6 percent. Its shares are up by 14 percent this year, versus 10 percent on the Standard & Poor’s 500 index.
That performance helped boost the total compensation HCA’s chief executive, Samuel N. Hazen, received last year to $30.4 million, a 13 percent rise from 2019, documents show. Although Hazen’s salary was 5.8 percent lower in 2020, the total worth of his compensation package equaled 556 times the compensation received by the median employee at HCA — $54,651.
The figures highlight the growing CEO pay gap, a problem among many public companies according to some investors and workers and even a few CEOs. In 2019, for example, the average pay ratio among 350 large American companies was 320-to-1, according to research by the Economic Policy Institute, a left-leaning think tank in Washington, D.C. In 1989, the average was 61-to-1.
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Because Brown, the emergency department worker, makes even less than the median, Hazen got roughly 1,000 times Brown’s pay. Brown says he lives with his sister because he doesn’t earn enough from his job at Research Medical to pay for his own apartment. He said he hasn’t had a raise in two years.
NBC News asked Hazen to discuss his leadership of HCA and his pay. He declined through a spokesman, who said the company’s compensation philosophy is centered on performance.
“We value our colleagues and the work they do to care for their communities,” the spokesman said in a statement, “and we are committed to offering competitive compensation and benefits packages, as well as opportunities for professional development and career advancement.”
The Service Employees International Union, of which Brown is a member, and which connected Brown to NBC News, has been negotiating unsuccessfully with HCA to raise its workers’ pay to $15 an hour for more than a year. NBC News questioned HCA about Brown and his colleagues’ pay in Kansas City on March 31. Later that day, the company agreed to raise its wages to $15 an hour. SEIU employees in other areas didn’t get the pay increase.
Spring is when many public companies report how much their CEOs and other top executives earned during the previous year. One of the details investors focus on in the regulatory filings is the so-called CEO pay ratio. The calculation, required by the Securities and Exchange Commission since 2017, compares the compensation a company’s CEO received with that of its median worker.
Some companies pay their CEOs far more than the average, of course. In 2019, for example, C. Douglas McMillon, Walmart’s chief executive, received a package worth $22 million or 983 times the median worker.
Cynthia Murray, 64, is a Walmart associate in Maryland who has worked for the retailer for 20 years. She makes $15.27 an hour and is a member of United for Respect, a nonprofit that advocates for retail workers.
“My raise this year was 30 cents an hour,” Murray said. “Walmart is one of the richest companies in the world. Why shouldn’t they take some of that money and give back by raising workers’ wages?”
Randy Hargrove, a Walmart spokesman, said in a statement: “Over the past five years we’ve made incremental investments of more than $5 billion in training, education and higher pay for store and club associates in the U.S. alone. Walmart has represented a ladder of opportunity and we are committed to our associates’ long-term success.”
Three-quarters of the company’s store management teams started as hourly associates, he added, noting that an average Walmart store manager earns more than $180,000 a year.
Moving the goalposts
The pandemic has made life harder for many workers, and some lost their jobs altogether. Those who hung on, especially front-line health care workers like Brown and retail workers like Murray, faced enormous challenges because of Covid-19.
Many health care companies also took hits last year. Hospitals’ profits, for example, were hurt when some state governments temporarily banned moneymaking elective procedures to keep beds available for pandemic patients.
The bans dented HCA’s results but not its CEO’s pay. That’s because the compensation committee of the HCA board decided to exclude from its pay computation the financial results from two months when the bans had a severe effect.
By essentially moving the goalposts on the pay calculation, the HCA compensation committee made it easier for Hazen and other top executives to use a new profit measure that excluded months when profits were adversely affected. As a result, HCA executives received more incentive pay than they otherwise would have, the filings show.
Based on the revised metric, Hazen received $3.52 million in part because the company’s earnings exceeded the new threshold by 167 percent. Had the goalposts not been moved, the filings show, the company’s performance would have cleared the threshold by only 44 percent, resulting in far lower incentive pay.
The compensation committee of HCA’s board said in the filing that it excluded the two months of performance because the pre-Covid-19 earnings targets were no longer appropriate in the pandemic, “which was outside of management’s control.” The committee also said the easier performance measure was proper because the company’s top executives were committed to protecting HCA workers during the pandemic. According to the filing, the executives wanted to “keep them safe and keep them employed.”
The HCA directors overseeing the pay are Meg Crofton, a former executive at The Walt Disney Co.; Robert J. Dennis, a former executive at Genesco Inc., a specialty retailer; and Charles O. Halliday Jr., chairman of Royal Dutch Shell PLC.
Through the HCA spokesman, all three declined interview requests. The spokesman also declined to answer questions about why HCA moved the pay goalposts. The company’s proxy says it also reduced executives’ payout opportunities for the months most severely affected by the Covid-19 pandemic.
Moving goalposts is a big concern in executive pay, said Nell Minow, a corporate governance expert at ValueEdge Advisors, which helps institutional investors engage with the companies whose shares they own.
“The problem is not that somebody is getting paid a lot of money,” Minow said. “The problem is their pay is supposed to have an upside and a downside, and right now, it’s basically heads I win, tails you lose.”
Susan Fischer, 58, has been a registered nurse at Mission Hospital in Asheville, North Carolina, since 2005. HCA purchased the nonprofit facility in 2019, and since then, she said, staffing levels have fallen at the hospital while cleanliness and other conditions have deteriorated.
Last year, nurses at the hospital won union representation, a blow to HCA. “When we started unionizing two years ago, it was definitely about the lack of patient care, nurse-to-patient ratios and decrease of ancillary staff,” Fischer said. “Employers used to take care of their people. Now we feel like we’re disposable and we’re not.”
For a different point of view, HCA connected NBC News with Janet Garrett, a registered nurse at HCA Sky Ridge Medical Center in Lone Tree, Colorado. A condition of the interview was that the HCA spokesman had to be present.
Garrett, who said she isn’t involved in direct patient care, is director of quality and regulatory at the hospital and said she is proud to work for HCA. “The whole time I worked for this organization, I always felt very supported,” she said. “I felt they never made decisions that did not put their staff or patients first.”
The HCA spokesman also said in a statement that the company didn’t lay off any workers because of the pandemic and that it introduced “a pay program that continued paying colleagues 70 percent of their salary, even when there was no work for them due to government mandates that halted many elective procedures. In 2020, this program helped more than 127,000 members of our HCA Healthcare family support themselves and their families.”
2,316 times the median
HCA isn’t alone in paying its chief executive vastly more than what rank-and-file workers earn. Acuity Brands, an industrial technology company, paid its CEO, Neil M. Ashe, $21 million last year, or 2,316 times the median employee’s pay. An Acuity spokeswoman said the company’s pay program “is very well aligned with our shareholders’ interests.”
Lawrence Culp of General Electric got $73.2 million last year, the lion’s share of it in stock awards that vest when performance and service requirements are met. The value of the package put Culp at 1,357 times the median GE worker. A spokeswoman for the GE board said in a statement that the stock award won’t pay out until 2024 at the earliest and that it “is tied to producing results and only can be attained if the company delivers substantial value for shareholders and employees.”
Starbucks, the ubiquitous coffee shop chain, paid its CEO, Kevin Johnson, $14.7 million last year. That was 1,211 times the pay of its median employee, the company’s filings noted. A Starbucks representative said it recently instituted a pay increase that resulted in wages of at least $15-an-hour for over 30 percent of its U.S. retail partners.
And former Walgreens CEO Stefano Pessina got $17.5 million last year, 524 times the median worker’s pay. A Walgreens representative said the company’s pay resulted from “a thoughtful and thorough process to balance the impacts of Covid-19 on our business with the extraordinary efforts of our team members who embraced our collective critical role in the response to the pandemic.”
None of the chief executives agreed to speak with NBC News about their pay packages.
One CEO who’s bucking the pay trend is Glenn Kelman, head of Redfin Corp., a Seattle-based residential real estate company that uses technology to make buying and selling a home easier.
Kelman said he gave up his salary in 2020 and that in 2019, the most recent year for which figures are available, he got $1.08 million in cash and stock, or 14 times Redfin’s median employee pay. Kelman, who has been CEO since 2005, owns 1.5 percent of the company’s shares.
Kelman says excessive CEO pay essentially extracts money from workers. “I want to be admired, like anyone, and the way to do that is by doing admirable work,” he said. “But I don’t want to do that at the expense of all the other people who have made Redfin great. If you believe that it takes a company to make a company, that should also be reflected in your pay philosophy.”
Each year, when public companies host their annual meetings, stockholders are asked to vote on their pay practices. Many get resounding support.
Last year, for example, 91 percent of HCA’s shareholder votes on executive pay were cast in favor, its filings show. The results of this year’s vote on HCA’s pay will be disclosed after its shareholder meeting, scheduled for April 28.
Large asset managers like BlackRock, Fidelity and Vanguard typically vote in favor of CEO pay. Last year, for example, the data analytics firm Insightia said BlackRock voted yes on 95.6 percent of pay votes, Fidelity supported pay in 94.6 percent of its votes, and Vanguard voted for in 94.2 percent.
BlackRock said it is increasing its engagement with companies about pay and that it voted against the re-election of over 690 compensation committee directors responsible for setting executive pay at 350 companies in 29 global markets last year.
Fidelity said it “acts in the best interest of its shareholders and remains focused on maximizing long-term shareholder value.”
A Vanguard spokeswoman said in a statement: “Our investment stewardship team evaluates executive compensation proposals case-by-case and looks for pay plans that incentivize long-term outperformance versus peers.”
Other investors may be tiring of ever-rising CEO pay. So far this year, shareholders at six large companies have voted against their pay practices, according to Insightia, up from two companies during the same period last year. Such votes aren’t binding, but they are a black eye for companies, governance experts said. The six no votes represent 3.6 percent of large public company votes reported so far, Insightia said.
Acuity Brands, whose CEO made 2,316 times the median worker, was among those falling short, with 67.2 percent of votes cast against its compensation. Starbucks and Walgreens both reported majority no votes on pay this year — 52.5 percent of votes cast by shareholders at both companies’ annual meetings were thumbs-down. (Vanguard cast a no vote at the Walgreens meeting, its spokeswoman said.)
Individual investors who consider corporate pay practices to be excessive may feel helpless about the rising pay gap. But they shouldn’t, Minow said.
“Just about everybody has a 401(k) plan, mutual funds, some kind of pension plan,” she said. “Is your pension plan approving all of these pay plans? If so, you can do something about it — you can tell them not to. You can switch your 401(k) to a different outfit.”
In the meantime, Minow said, “the best message the CEO can give employees is: ‘We are in this together. I do well when you do well.'”