Raising the (directors’) rates at Hospira …

July 28, 2010

We all hear a lot about health-care inflation. We hear less about inflation in director compensation at health-care companies. Yet it seems to be very real at Hospira (HSP), the specialty pharmaceutical supplier to hospitals, clinics, nursing homes and other institutions.

On June 16, Hospira’s board voted itself a decent pay raise: It increased its annual retainer to $65,000 a year from $50,000 a year, according to an attachment tacked on to the end of the quarterly report it filed this morning. Given that the board met six times last year, according to its most recent proxy filing, that would mean $10,833 a board meeting, up from $8,333.

The company also increased the retainers paid to committee chairmen, in some cases substantially. Chairing the audit committee brings in $25,000 a year, up from $10,000. The compensation-committee chair now brings $20,000 a year, up from $7,500. The two remaining committees — Science, Technology & Quality and Governance & Public Policy — saw their chairmanship retainers rise to $12,500 from $7,500.

The Hospira board did decide to reduce or eliminate two fees: The lead director retainer went to $50,000 from $75,000 (in both cases on top of the regular retainer), and the company eliminated the $1,500 per-meeting fees it had been shelling out (or $1,000 for those attending “other than in person” — presumably meaning by telephone rather than some sort of psychic attendance).

But then the board more than made up for that by adding a new committee-membership retainer, ranging from $17,500 for serving on the audit committee and $10,000 for the compensation committee to $5,000 for the other two. An annual $150,000 award of restricted stock appears to be unchanged. All told, excluding the restricted stock, the total for the company’s nine board members and four committees lands somewhere around $860,000 a year. With restricted stock, it’s closer to $2.2 million.

That said, it’s hard to put an all-in figure on the overall increase, since we only know that meeting attendance last year was 97% — we don’t know how often board attended meetings in person as opposed to telephonically (or astrally, for that matter). The retainer alone, of course, represents a 30% rase, but factoring in six in-person meeting fees under the old system, it falls to closer to 10%.

Even a 10% overall increase would beat the 4.3%, for example, that Hospira expects its overall wages to go up overseas each year on average (as estimated for pension-accounting purposes in the company’s 10-K).

Suffice to say, Hospira’s directors aren’t likely to be hurting any time soon: Under the old pay structure, they made between $218,000 and $240,000. We’ll find out next spring, with the company’s next annual proxy, just how they have fared in the meantime.

Image source: Joe Shlabotnik via Flickr

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