Top, middle and bottom

OK, it's not romance novel with a hot, hot, hot description of ..., or even a quirky English murder mystery (last one I read had the victim planted head first into a pot like a bizarre plant), but last week's SEC filing by CDI Corp. did manage to keep me interested Friday afternoon while I sat around waiting for reports from the unsuccessful negotiations between Temple University Hospital's management and the union, the Pennsylvania Association of Staff Nurses and Allied Professionals. Oddly, there are connections between the issues raised in the SEC filing for CDI, a Philadelphia-based staffing firm specializing in engineering, and the 1,500 healthcare workers who have been out on strike since March 31.   

In the SEC document, what caught my attention was CDI's explanation of its compensation philosophy for top executives. Just over two years ago, CDI's top executive, Roger Ballou, got a 9 percent raise to $750,000 a year after  CDI hired Hay Group, a Philadelphia employment consulting organization, to analyze the compensation of CEOs at parallel companies. Ballou got the 9 percent raise, effective January 2008, a month of after the start of the recession, because his compensation had dropped below the median level of executives in similar companies by industry and revenue. As the SEC document explained, CDI's compensation committee likes to pay its top executives right in the middle, at 50 percent, plus or minus 20 percent.  

So what does that have to do with nurses at Temple? What struck me about the SEC document was the explanation of how CDI likes to pay at 50 percent of the going rate for executives. All companies make those same evaluations in creating their compensation policies. They use surveys and benchmark studies to determine the market range of any profession or job category, whether it is secretary, nurse, chief executive, janitor or ball player.  Then they decide where they want to fit in, weighing how much quality they can afford and how much supply of that profession is available on the market.

Temple has said it wanted to be on the top end of that range and has determined that what it is offering to Temple's nurses satisfies that. The healthcare professionals say that Temple is breaking a promise by withdrawing a valuable part of the compensation that put it at the top end. 

Also on Friday, while I was waiting for Temple news, I got an anonymous phone call from an angry nurse who complained that Temple nurses were ridiculous for complaining about their wage package when her package was much worse and hospitals are laying off nurses. She worked for St. Christopher's Hospital for Children, which is now owned by Tenet Healthcare Corp. When Tenet came in, it eliminated every bit of accrued sick and vacation pay, she said. We figured it out that Tenet's move probably cost her $27,000 in lost wages due to her longevity with the hospital. By her logic, because she's getting less, Temple nurses should also less.

I think Roger Ballou's compensation is illustrative: CDI has said it wants its executives to be in the middle. If pay for the top chief executives, or nurses, or teachers, or janitors, or ball players falls, then the pay for the ones like Ballou, or like the nurse at St. Christopher's (assuming nurses at the pediatric hospital are in the middle range) will also fall. Worse, the pay for those at the bottom will really fall. That's probably not a problem for chief executives and maybe even not for nurses, but it certainly harms janitors.

In general, if wage ranges fall, it's a problem for society and the overall economy. Wage ranges are governed by the wages at the top, especially when there are so many forces, such as unemployment, working to lower compensation ranges.

More on other comparisons between CDI and the nurses tomorrow.