Multiple Symptoms of Excessive Pay at Cardinal Health

Michelle Leder reported on Footnoted.org: The proxy that Cardinal Health (CAH) filed earlier this week included three separate shareholder proposals that all had to do with compensation-related issues.

As footnoted.org readers know, Cardinal has been a bit of a regular (or perhaps we should say repeat offender) on footnoted.org over the past three years. So perhaps the three proposals — filed by CALPERS, the City of New York’s Comptroller, and AFSCME — should come as no surprise. But a quick skim of Cardinal’s earlier proxies shows that the company hasn’t exactly attracted this kind of attention in the past. One of the few I did find was a proposal by AFSCME two years ago to declassify the board, which passed by a wide margin and was put in place last year, which of course, Cardinal didn’t have to do since boards are not required to act no matter what the outcome of the vote is.

The proposal by CALPERS minces few words: "According to CalPERS’ pay-for-performance model, the Company’s compensation ranks in the bottom quintile. The Company significantly out-paid its CEO relative to the Company’s peers by two to one from 2000 to 2004. The Corporate Library, utilizing its own compensation analysis, graded the Company’s CEO compensation “D”." The proposals filed by both the NYC Comptroller and AFSCME were equally biting.

Cardinal’s board, of course, opposes all three. But perhaps to stifle some of the criticism, it included for the first time extensive footnotes — four pages worth — following its summary compensation table this year. Among the pearls buried in those footnotes are that former CEO Robert Walter spent nearly $200K on personal use of the corporate jet last year, up from $175K in 2005 (which was a corrected number from the $151K reported in the 2005 proxy — Cardinal explains the difference as an "administrative error") and received another $142K in "tax reimbursements".

Seems like an awful lot of symptoms all pointing to the same diagnosis.