WOONSOCKET – CVS Caremark Corp. paid CEO Thomas M. Ryan nearly three times more than he should have received based on shareholders’ return on equity last year, a study commissioned by Bloomberg News has found.
In a study of executive compensation at 271 companies last year, pay expert Graef Crystal found that Ryan should have been paid $10.26 million in 2009 based on CVS shareholders’ 13.2 percent total equity return.
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Instead, Ryan received a package valued at $30.43 million – 297 percent more than Crystal’s formula suggested he should have earned, and a 27.2 percent increase compared with the prior year.
CVS spokeswoman Carolyn Castel defended Ryan’s compensation last month, prior to the new study’s release.
“CVS Caremark determines annual compensation for executives based on several critical factors, including achievement of the company’s short-term strategic, operational and financial goals, progress toward our long-term objectives as well as comparisons with executive compensation in our peer group, independent analysis and other factors,” Castel told Providence Business News in an e-mail.
Crystal, a former adviser to Coca-Cola Co. and American Express Co., has spent the last 30 years developing statistical formulas to see whether shareholder returns affected executive pay – and he says the answer is no.
“The return explained none of the variations,” Crystal told Bloomberg in a telephone interview. “Simply put, companies don’t pay for performance.”
Ryan was the 18th most overpaid of the 271 CEOs studied by Crystal. The most overpaid was Frank Baldino, CEO of drugmaker Cephalon Inc., who got $11.15 million when he should have received only $1.34 million, according to Crystal’s calculations.
At the other end of the scale, Google Inc. CEO Eric Schmidt was the most underpaid. He received $245,322 when he should have gotten $17.36 million based on Google shareholders’ 101.5 percent return, Crystal said.
Additional information is available at cvscaremark.com.
