Novartis AG (ADR) (NVS) and More: Are Big Pharma’s CEO Pay Packages Outrageous?

With this in mind, let’s look at a comparison of 10 large U.S.-based pharmaceutical firms’ CEO pay in 2011 versus stock return over the last two years. Sure, an argument could be made for looking at a longer time horizon, but let’s take the “what have you done for me lately” viewpoint here.

Sources: Company SEC filings, Yahoo! Finance.

J&J’s former CEO, William Weldon, ranked as the highest-paid of the group with nearly $27 million total compensation in 2011.  However, his company also came in at the bottom of the pack in terms of two-year stock performance.

Biogen beat all of the other companies in stock performance, but CEO Scangos was next to last in compensation. Likewise, Robert Hugin of Celgene Corporation (NASDAQ:CELG) received the lowest total pay of the group, yet his company’s return was third-highest. John Martin was in the bottom half of CEO compensation packages, but Gilead still ranked second in two-year return.

Money for nothing?
What does all this really mean? Maybe it’s much ado about nothing. One of the CEOs without a platinum parachute, J&J’s Weldon, was paid the most despite leading his company to the worst share performance of the group. Biogen’s Scangos and Gilead’s Martin might have nice termination deals, but they both provided better results for the money than most other CEOs did.

Shareholders should be leery of termination agreements that give ridiculous amounts of money to executives for doing nothing. They should also demand that compensation packages be tied to performance in a way that is meaningful.

I’m not a subscriber to the class warfare mentality that attacks individuals simply because they make a lot of money, though. A CEO who delivers extraordinary results deserves extraordinary pay. Without appropriate incentives to find the most capable leaders, companies — and investors — would be in dire straits.

The article Are Big Pharma’s CEO Pay Packages Outrageous? originally appeared on Fool.com and is written by Keith Speights.

Fool contributor Keith Speights has no position in any stocks mentioned. The Motley Fool recommends Gilead Sciences.

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