Pay cuts and the market

Yesterday I wrote about how much "fun" I had reading an SEC filing for CDI Corp., the Philadelphia-based staffing company that specializes in engineering. That was my Friday afternoon reading as I waited to hear about the state of negotiations between Temple University Hospital and the Pennsylvania Association of Staff Nurses who have been out on strike since March 31. Yes, I need to get a life! Anyway, CDI Corp. did not have a great 2009 and so its chief executive, Roger Ballou, did not earn the compensation that he might have earned at another time.

And that's the point that Temple is making. The market realities of the hospital business are such that compensation just can't be what it used to be. (Although we'd have to see how that applies to its top officers.)

So here's how it went for Ballou: Ballou took a small pay cut, like most of CDI's top executives. That reduced his regular salary from $750,000 to $735,425.  He also has an opportunity to make a cash bonus depending on the state of the business. His maximum bonus could have been $600,000, but the company awarded him 6.25 percent of that or $37,500. His total compensation was $1,086,600. That's down from $1.6 million, his 2008 total compensation.

The point is that compensation for top executives does respond to the market. Ballou's compensation is down by a third. Of course, at $1 million a year, who cares? Even at $735,425 a year, who cares? That's a lot of money.

The question at Temple is whether the administration's stance is in response to the market or whether it has another aim in mind.