Peer pressures – Use of CEO compensation comparisons draws heightened scrutiny

Source: Melanie Evans, Modern Healthcare, May 11, 2013
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As chief executive pay continues to draw heightened scrutiny in the wake of the Great Recession, compensation comparisons used by governing boards to justify the payouts to shareholders and regulators are coming under fire from critics. The practice, common in the healthcare sector, has drawn fire for years. Critics claim reliance on peer group analysis is flawed and artificially inflates salaries and bonuses. Their complaints are beginning to be heard, including by the healthcare sector. One of the largest publicly traded health systems has revised its executive compensation peer group, which considers the market in which companies must compete on pay to recruit and retain top talent. … The use of peer groups by board compensation committees in determining CEO pay has played a major role in driving those salaries upward, critics contend. Ira Kay, a compensation consultant and proponent of their use, says executives operate in a competitive market for top talent and incentives such as stock options, bonuses and generous retirement packages have successfully retained highly mobile executives….

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