Execs: Are You Ready For This Attack?


Just hold on-- no one is taking your money just yet.

It's not over!

Perhaps many of you thought that the collective screaming on the topic of executive compensation would be reserved for the heads of financial institutions.

But that was likely just the beginning.

By this Friday, Congress will have received detailed reports from more than 50 health insurers, who were "asked" to supply information on management salaries and packages that top $500,000 a year.

Whatever the reality, it's perception that counts. And it's true that those amounts will probably shock some citizens. No. 1 on the list, H. Edward Hanway of Cigna, takes home more than $11 million, and the perception of the public at large, caught between spiraling costs and unstable income, is that figures like that are just too much. Further, for many, the health insurance industry has always generated feelings of anger (just as it is doing now with reform debate raging in Congress and at town meetings). Plenty of people that have health coverage feel that their denied claims could well have been approved, if the funds hadn't already been set aside for the men in charge. (The percentage of premium earmarked for patient care was one of the items included in the survey.) According to a CNNMoney.com story on this subject, a PriceWaterhouseCoopers studyfound that "in the early 1990s, health insurers spent more than 90 cents of every dollar collected on patient care, but … in 2007, national publicly-traded health companies spent about 81 cents of every dollar on patient care."


No one's going to be discussing the salaries in journalism/publishing (a business segment never known for its perks even before the collapse of the industry), but at this point, it seems as if every other industry is fair game. Health insurers are asking why they should be singled out. So, what's the best way to deflect the debate? Ask top executives to formally justify their existence every year? Come up with some fancily-spun "statistics"? Practice some misdirection? Sorry, but people are too smart to swallow those two latter options. As for the first, it could lead to an escalation of the situation, not relief. Yes, executive tenure would likely decrease substantially with a "justification" procedure in place, but that could force compensation packages even higher as companies pile on the perks to land the best available candidate with the highest probability of sticking around.

Likely the best advice is to wait it out.

Analysts, the media and everyone else ramped up the rhetoric on executive compensation after the flame-out of Enron in 2001. And here we are, still talking about it eight years later. True, the discussion is playing out in an environment colored (permanently?) by the recession. Plus, reform will definitely come to pass for companies that took bailout money, and EU legislators are talking about similar compensation controls. But amidst an economy slow to enter the recovery stage, and loud political battles on CIA abuses and health care, it seems there are more important problems to tackle, so little will come of all the hand-wringing. The thunder won't get any louder and you'll weather the storm without having to open your 401(k)umbrella. And at that point, you can start preparing for the next series of income attacks in three to five years.

More Executive Strategies Including:

Todd Obolsky has covered a wide range of industries for Vault’s print and online company profiles (including consumer products, government, non-profit, retail, advertising, internet, energy and publishing) and manages Vault’s Layoff Tracker. He has also written for Penguin Group’s Rough Guides and DK travel series. He holds a BS in Mathematics from Bucknell University and an MBA (with a market research concentration) from City University of New York’s Baruch College.

Comments? Send them to executivecareers@cnbc.com