The longtime CEO of King of Prussia, Pennsylvania-based Universal Health Services, Alan B. Miller, 80, received $21.6 million in compensation last year — or $541 for every $1 earned by a median employee.
FierceHealthcare reviewed U.S. Securities and Exchange Commission filings for public healthcare companies that showed just how much the executives of the largest public health system executives made compared to their average worker, as reported under SEC rules.
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In general, executive compensation is driven by the size of the business as measured by their revenue, in addition to their executive compensation philosophy, which is shaped by a comparison of business and performance against a composite of their peer organizations. Executive compensation committees are considering everything from total shareholder return, the profitability of the business, the share value and how they are trying to position themselves against their competitors. They also need to consider how they will tailor that package down through the entire C-suite.
“All of those things are factors that get you to this bottom line,” Sullivan said.
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Sullivan also pointed to differing approaches between Universal Health Services and HCA Holdings in the way they incentivize their top talent. For example, Johnson’s compensation offers a pretty even split between stock awards and option awards at $5.4 million and $5.2 million, respectively.
“Then look at Universal. They’re putting more of the emphasis on options,” Sullivan said. Miller’s compensation package offers $2 million in stock awards and $16 million in option awards—a much more leveraged package. “Options have zero value on day one. But if Alan Miller and his team are able to continue improving the factors that drive share value, the value of the options is potentially a lot more than the stock awards,” Sullivan said.
As for UHS, in its disclosure the company said the median UHS employee's salary is an estimated $39,978.
That puts compensation for Miller, who has been CEO and founder of the company for nearly 40 years, between the 75th and 90th percentile for companies with revenue between $5 and $15 billion, the company said, citing a 2017 CEO pay ratio survey completed by Equilar of 356 public companies across the country.
UHS' ratio is close to the 75th percentile for companies with greater than 43,000 employees, they said.