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CHS CEO Pay Has Sunk Alongside Stock Price

News  |  By Steven Porter  
   April 06, 2018

The top Community Health Systems executive made less than half as much in 2017 as he did in 2015—even though his performance bonus has grown.

Wayne T. Smith, board chair and CEO for Community Health Systems (CHS), based in Franklin, Tennessee, has seen his total annual compensation drop dramatically in recent years as the company he’s helmed more than two decades has faced financial troubles.

Smith, who earned more than $10.4 million in 2015, was compensated $4.9 million last year, according to documents CHS filed Thursday with the Securities and Exchange Commission (SEC).

His total compensation included $812,000 in non-equity incentive pay for 2017, which was significantly higher than the $640,000 in incentive pay he earned in 2016 and the $400,000 he earned in 2015.

But this swelling bonus—which is tied to several specific performance metrics—was eclipsed by the plummeting value of CHS shares.


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Smith was awarded stocks valued at nearly $7.3 million in 2015, about $2.3 million in 2016, and less than $1.4 million in 2017. Since executive officers have been granted about the same number of restricted shares each year since 2014, this decline in value was the result of a declining stock price, the company noted in its SEC filing.

Company shares hit an all-time high in summer 2015, trading above $52 apiece, before they took a nosedive that leveled out below $5 in late 2016. They have continued to trade below $7 throughout 2018, as CHS scrambles to execute what it calls a “portfolio rationalization strategy.”

That strategy includes selling off CHS hospitals to competitors in order to pay down debt. But these turnaround efforts have brought some unwelcome consequences.

The company is in arbitration with Quorum Health, which it spun off in 2016, over disputes related to transition services agreements. And it was just sued by Microsoft for allegedly violating software licenses amid its divestitures.

Last month, the company had its credit downgraded by S&P Global Ratings.

Pay ratio

The documents CHS filed Thursday with the SEC notify investors of the company’s annual stockholders meeting to be held May 15. They also include a CEO pay ratio disclosure newly required by the Dodd-Frank Act.

Smith’s total compensation of $4.9 million last year was 80-times as much as that of the median CHS employee, who earned about $61,600, according to the filing.

That 80-to-1 ratio—which accounts for the salary and benefits of 95,000 full-time, part-time, and temporary CHS employees—is significantly lower than the ratios reported recently by other for-profit hospital operators.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


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