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 was not severe and after quarantining, 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 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 and publicly traded network of 185 hospitals and 121 freestanding surgery centers in 20 states and England. Even in the year of Covid, 2020, the company generated $51.5 billion in revenues and increased its pretax earnings by 3.6 percent. Its shares are up 14 percent so far this year, versus 10 percent on the Standard & Poor’s 500 index.
This performance helped boost the total compensation received by HCA’s chief executive, Samuel N. Hazen, to $30.4 million last year, a 13 percent raise 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, workers and even a few CEOs. In 2019, for example, the average pay ratio among 350 large American companies was 320 to one, according to research by the Economic Policy Institute, a left-leaning think tank in Washington, D.C. In 1989, the average was 61 to one.
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Because Brown, the emergency department worker, makes even less than the median, Hazen received roughly 1,000 times Brown’s pay. Brown says he lives with his sister because he does not earn enough from his job at Research Medical to pay for his own apartment. He said he has not received 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 their wages to $15 an hour. SEIU employees in other areas did not receive 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 these regulatory filings is the so-called CEO pay ratio. That calculation, required by the Securities and Exchange Commission since 2017, compares 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 now 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 told NBC News. “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 frontline health-care workers like Brown and retail workers like Murray, faced enormous challenges due to Covid.
Many healthcare companies also took a hit in 2020. Hospitals’ profits, for example, were hurt when some state governments temporarily banned moneymaking elective surgeries to keep beds available for pandemic patients.
The bans dented HCA’s results but didn’t diminish 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 during which 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 achieve a new profit measure that excluded months when profits were adversely impacted. 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 earnings targets were no longer appropriate in the pandemic, “which was outside of management’s control.” The committee also noted that 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 Company, 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 NBC News’ 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 impacted by the Covid 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 told NBC News. “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, N.C., 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 told NBC News. “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, Colo. A condition of the interview was that the HCA spokesman had to be present.
Garrett, who said she is not 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 did not lay off any workers due to the pandemic and 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 is not 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.”
General Electric’s Lawrence Culp received $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 that 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 “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 received $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 these 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 received $1.08 million in cash and stock, or 14 times Redfin’s median employee pay. CEO since 2005, Kelman 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 told NBC News. “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 receive 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 Black Rock, 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 on pay and 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 time period last year. Such votes are not binding but they represent 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 a majority no vote on pay this year — some 52.5 percent of votes cast by shareholders at both companies’ annual meetings were thumbs-down. (Vanguard cast a no vote at the Walgreen’s 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 401k 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 401k 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.'”