Do pharma CEOs get paid too much?

In a recent Pf poll, you voted ‘yes’, but are things likely to change? By Di Spencer, Pf Web Editor

The salaries and bonuses of pharma CEOs are a constant source of wonder and outrage to many in the media, and the industry too. Even at times when pharma seems to be struggling financially, laying off staff and cutting employee benefits, senior executive rarely seem to suffer their share of the austerity.

Late last year it was revealed that pharma CEOs earn more than any other industry, with the top paid earning more than $30 million a year. Many of us can only dream of earning $30 million throughout our lives, and have difficulty even conceiving of what it would be like to have that kind of sum enter our bank account on an annual basis.

But are these massive pay packets justified? Is life really ‘tough at the top’? Do they deserve this kind of remuneration? Well, according to visitors to the Pf website, the answer is no. In a recent Pf opinion poll, a vast majority of 60% voted that company CEOs get paid too much. A generous 22% said they believed the payment was in proportion to the pressure of the role (possibly CEOs or their wives?), while a humble 18% agreed that it was not their place to say.

The men at the top (as men it unfortunately often seems to be) will always be paid obscene sums, but is it fair that pharma in particular is so well paid? And, if it isn’t, what should the industry do about it?

Hay Group recently claimed that pharma incentive models and ‘fundamentally flawed’. They said: “Big Pharma’s dependence on traditional executive compensation plans threatens to work in opposition to the very ‘medicine’ of innovation that could restore the sector’s once vaunted health.”

The analysis of 2010 proxy data from 50 US pharmaceutical companies showed that revenue remains the most common measure of both short and long-term incentive programs, yet Hay Group claims these should be reformed to focus on pipeline and the development of innovative products that will benefit patients.

Hay Group suggests companies need to implement novel programs and practices to encourage executives to place innovation much higher on their list of priorities as is currently done in early biotech and emerging biopharmas.

So, the pharma’s current incentive schemes might be having a more detrimental effect that simply making us green with envy – they could be limiting the very potential of medicine discovery for the future.

Unfortunately, much like the coalition Government’s financial changes, good intentions are all very well, but until the privileged few running things are willing to take a pay cut, the rich will continue to get richer.

Contact the author:

diana.spencer@healthpublishing.co.uk

@HSPDi