News CoverageThe Daily News of Los Angeles
WELLPOINT'S CEO MAY REAP RICHES;
POTENTIAL WINDFALL RAISES QUESTIONS
by Evan Pondel, Staff Writer
Oct 30, 2003
The chief executive officer of WellPoint Health Networks Inc. will see his salary swell by tens of millions of dollars should the company's $16.4 billion merger with Anthem Inc. receive approval.
Leonard Schaeffer's WellPoint holdings include 3.3 million shares, according to a Securities and Exchange Commission filing - which has vaulted in excess of $70 million to more than $300 million in recent days.
Schaeffer will receive a lump sum of $27.5 million in salary and bonus compensation and about $10 million more in retirement benefits if the Anthem deal closes, according to Ken Ferber, a spokesman for Thousand Oaks-based WellPoint. Schaeffer, currently chairman and chief executive officer of WellPoint, will be the chairman of the combined company.
Consumer advocates are lambasting 58-year-old Schaeffer for his lavish compensation package.
"When a chief executive officer is handed that much money, patients get short changed because there is less money for medical care," said Jerry Flanagan, consumer advocate for Santa Monica-based The Foundation For Taxpayer & Consumer Rights.
Flanagan said that WellPoint is known for siphoning off premium dollars to pay for lavish salaries and bonuses for company executives. And "our insurance premiums should not be used to finance the golden parachutes for company executives," he said.
But Schaeffer's salary and bonuses are in line, if not on the conservative side, with what most chief executives are making at companies that generate about $245 million in quarterly net income. Ferber said it has always been important to Schaeffer to align the performance of the company with personal compensation.
As for the more than $300 million in stock Schaeffer now owns, "the market is traded publicly," Ferber said. WellPoint shares declined 29 cents to close at $89.66 Wednesday on the New York Stock Exchange.
Laurie Sobel, a senior attorney at the Consumers Union in San Francisco, said the notion that two behemoth companies are merging is just as worrisome as Schaeffer's salary.
"They will use their combined market power to dictate the rules," she said. "And if you reduce competition, they may have the ability to get rid of more consumer protections."
Schaeffer's salary "raises the question as to whether we are seeing a good allocation of our resources when we have a health care crisis," Sobel said. "That's why we are advocates of a universal health care system."
Evan Pondel, (818) 713-3662 or firstname.lastname@example.org