The top five executives at Merck took home $36 million in compensation last year. All received cash bonuses of between $563,767 and $2.2 million even though two of them had “below-target performance,” according to a Merck filing with the SEC. They also got to use the corporate jet, and so did their wives.
The largesse came despite the fact that Merck’s sales declined 3 percent from $6.2 billion to $6 billion, and the company’s stock fell by 50 percent, from $60.55 to $30.40. Net income was “up,” but only on paper. If you take out the $4.5 billion Vioxx settlement from 2007, then net income declined 49 percent for the year, to $1.9 million. The company also laid off 8,400 people.
Nonetheless, all four of Merck’s top execs received cash bonuses. Here’s a table of their total compensation:
- CEO Richard Clark got $19.9 million, up from $19.6 million
- CFO Peter Kellogg got $3.8 million, up from $1.2 million
- R&D President Peter Kim got $4.2 million, down from $6.2 million
- Global Health President Kenneth Frazier got $5.5 million, down from $5.6 million
- General Counsel Bruce Kuhlik got $2.6 million (he was not a “named” exec last year)
Kim and Frazier’s compensation declined, but they still received cash bonuses of $875,023 and $986,155, respectively, despite what the company described as “below-target performance” from both of them.
The proxy also gives the execs the following:
Limited personal use of Company aircraft if approved by the Chief Executive Officer…An executive’s spouse may accompany the executive…
There’s an explanation for why Merck executive pay continues to go up even though the company goes down: It’s because Merck’s board uses a flawed compensation model.