To paraphrase Ogden Nash (actually Mr Nash did not utter this famous phrase, but for some reason we all think he did), “Spring has sprung, the grass is riz, I wonder where my bonus is?”
It is indeed bonus time. Executives in the private sector watched their bonuses shrivel as the oil and gas industry slid into the abyss but the 100 or so senior executives at Alberta Health Services (AHS) can rest easy. They’re being shielded from the “fiscal reality” plaguing the rest of us. Their bonuses are intact.
It’s called “pay-at-risk” for a reason
Premier Redford and Health Minister Horne strongly “suggested” that the AHS cancel the executive bonuses this year, but Stephen Lockwood, Chairman of the AHS Board, refused. He said it would be “unreasonable” to change compensation contracts after more than 90% of the fiscal year has passed.
“These people have already done the work and it would be wrong from many perspectives to not compensate them as per their terms of employment….We’ve already said that pay at risk is eliminated moving forward, but we are honouring our commitment for work that has already been completed.”*
Clearly Mr Lockwood is confused. Whether or not an employee finishes 90% of the fiscal year is utterly irrelevant. Unlike regular pay, “pay-at-risk” is not guaranteed and is not owed to an employee unless he meets specific “pay-at-risk” targets.
As my kids would say “That’s why it’s called “pay-at-risk, duh!”
Have the AHS executives earned their “pay-at-risk”?
Did the AHS executives meet their “pay-at-risk” targets? Let’s start with Dr Chris Eagle, the CEO of Alberta Health Services.
Dr Eagle’s “pay-at-risk” targets include (1) providing a safe accessible healthcare delivery system (measured in reduced wait times in the ER and for hip, knee, heart and cataract surgeries and radiation therapy), (2) improving staff and physician engagement, (3) engaging with local Health Advisory Councils and (4) creating a new organizational structure.
In the real world, targets (3) and (4) are freebies. “Engaging” local councils and “creating” a new org structure are in and of themselves pointless—what’s required is effective engagement and an effective org structure in order for these targets to count.
Back to the first two targets: wait times and improving staff and physician engagement. Dr Eagle missed all of his wait time targets—with the possible exception of treating and discharging patients from emergency within 4 hours—so the wait time targets are a “fail”. Physician engagement is sitting at an abysmal 38%—so that’s another “fail”. Consequently Dr Eagle’s “pay at risk” payout (excluding the two freebies) should be zero.
If Dr Eagle’s payout is zero then the payout for all his senior managers’ payouts will also be zero because Dr Eagle’s targets should cascade down and form part of the “pay-at-risk” targets of his senior managers.
That’s the way “pay-at-risk” compensation works in the private sector. Unfortunately that’s not how “pay-at-risk” compensation works for the PC government.
Last year AHS paid its senior staff $2.4 million in bonuses; $480,000 of which went to the AHS executive team. Dr Chris Eagle met just 63% of his targets and walked away with an extra $90,000 on top of his $580,000 salary.**
In any other organization, a university for example, 63% gets you a “D”. Only in government is a “D” worth $90,000.
But what’s really alarming is that in the real world Dr Eagle’s targets (reducing wait times, engaging with physicians) would be part of his day job for which he gets paid a $580,000 salary. Rethinking Alberta’s healthcare delivery system, eliminating physician bullying and stopping queue jumping—now that would be a legitimate “pay-at-risk” target.
Is “pay-at-risk” a term of employment?
When AHS Chairman Lockwood refers to abiding by “terms of employment” and “honouring our commitment” he implies it would be unfair or even illegal to eliminate “pay-at-risk” for this fiscal period.
While it’s true that “pay-at-risk” is a term of employment, this sudden desire to do the right thing rings hollow given that other AHS employees are not afforded the same “commitment”. Mr Lockwood appears to be just fine with the AHS decision to fire healthcare workers and reduce the hours of their overburdened colleagues, notwithstanding the terms of their employment.
But the ultimate hypocrisy comes from the lips of Health Minister Horne who said “Regardless of how people feel about the decision of the AHS board…It’s a decision for the AHS board…I don’t have the authority to interfere with someone’s contract of employment.”***
Recall that the last Health Minister fired Dr Eagle’s predecessor over the objections of the AHS Board. This Health Minister ran roughshod over at least three (count ‘em, three) agreements in principle he’d signed with the Alberta Medical Association. He’s arbitrarily reduced doctors’ compensation by $275 million and has repeatedly misled the AMA in the last year of contract negotiations.****
And now Minister Horne has had a fit of conscience…?
*Calgary Herald Online Mar 27, 2013
**Calgary Herald, Mar 29, 2013, A10
***Calgary Herald, Mar 28, 2013, A4
****AMA President’s Letter to Premier Redford Mar 22, 2013 http://bit.ly/165g8lT
Every time I read about these outrageous bonus amounts like $90,000 I fume. I understand that my job is just a “low level job” which earns me a salary suitable to a low level job but I don’t get a bonus unless I have done my job and then some. A bonus used to be compensation for a job well done, not just a designation predetermined amount of money for showing up for a full year.
I earn my bonus so should they and just for the record that bonus amount is probably the yearly salary of two average families who are trying to save enough money to send their kids to college.
Rose, you’ve put your finger on why this is so galling. Dr Chris Eagle has worked his way through many executive positions in Alberta Health Services and its predecessor organizations and we’re still no better off than we were 5 years ago. The emergency room wait time target has been in his objectives every year since 2009. He hasn’t hit it yet. He managed to hit two other wait time targets over all this time–once in 2010 for hip replacement surgery and once in 2011 for radiation therapy. Unfortunately he missed these targets the following year which tells me that this was a fluke and not the result of any sustainable change for which he could take credit. So tell me again why he deserves a bonus?
PS there’s no such thing as a “low level job”, especially when you’re doing it!…there are just jobs well done (or not as in Dr Eagle’s case).
Thanks again Susan! Hypocrisy doesn’t even begin to describe the attitude of all of these guys.
And as a note from my perspective (retired and not a CEO of anything any longer) – just one of Eagle’s annual paychecks would pay my fixed pension income for 29 years! Just sayin’.
Midge, I’ve worked in three different publicly traded companies and know exactly what it means to have “pay at risk”. When share prices tank you get nada. End of story and no whining about having worked for 90% of the fiscal year. Too bad, so sad. The AHS is trying to have it both ways, big fat base salaries topped up by guaranteed “pay-at-risk”. It’s hypocritical and ridiculous. Enough already!
Susan, there is another cost to these outrageous salaries and bonuses and that is the increased cost of benefits. At some point after Klein took office the government introduced the filthy rich Supplemental Executive Retirement Plan (SERP) which is supposed to be a matched contribution pension plan that is in addition to the Management Pension Plan. Over the years this filthy rich plan has been opened to more and more ‘executives’ in the “public service” and often has zero employee contributions. When you have some time have a look in Ministry and Board and Commission financials and see that non-cash benefits sometimes are worth more than a third of salary.
These bonuses ramp up the amount of the SERP and the public payment to same. I believe that the SERP is also a contributing (pun intended) factor in the massive severance payments that appear to now be business as usual.
It is also my understanding that when the health regions were dumped and AHS came into being that almost all, or all, senior executives, not just presidents were required to quit and reapply for positions in AHS. Just imagine how much must have been paid in severance then, under whatever guise it took in financials!
I enjoy your blog. Keep up the good, insightful and common-sense commentary!
Linda, thanks for the additional insight into AHS compensation. It looks like AHS executives and senior staff enjoy all of the perks available in the private sector and then some. The fact that they get a SERP top-up is a little hard to swallow when you consider they also get defined benefit pensions (something the private sector phased out quite some time ago). And you’re right, the SERP would form part of the severance calculation. Who knew that working in the public sector could be so lucrative!
Thank you Linda for your kind words of support.
Hi Susan. This message was sent to our group from an AHS insider about the executives’ “pay at risk” bonuses.
I thought the most important comment was the last one. It offers a solution to this mess. Let’s see if anyone of these execs steps to the plate!
“The Chair is defending payment of these. There are front page and full page articles opposing this.
There is another angle to this that is not in the media. These 100 execs all have personal services employment contracts that include a provision that they are eligible for the bonus as part of their compensation. If the bonuses are cancelled, then the person could claim that their contract was being violated, and that in effect it is constructive dismissal. From a legal perspective, they would have a good case, and likely win in court. In any case, constructive dismissal would then trigger the termination payment provision in their contract. That is confidential, but it would be not less than 1 year of salary + bonus, and in some cases more depending on length of service. That scenario would be far more expensive for AHS than paying the bonuses, and even if this is avoided for 2012-13, the same issue will come up a year later if the bonuses are not paid the following year. They have private sector golden parachutes in the public sector. I am disappointed that not one of them has stood up and offered to forego the bonus in light of the controversy.”
Elaine if the employment contracts for the AHS executives are similar to what you’d find in the private sector your friend is right–an employer can’t just stop paying an employee’s compensation without risking a constructive dismissal lawsuit. I’d be surprised if the AHS execs will voluntarily give up their right to “pay-at-risk”.
So how did Stephen Lockwood eliminate the bonuses on a going forward basis? The way most companies handle these situations is to pay their employees a one-time payment in return for the employees agreeing to forgo their “pay-at-risk”. We won’t know whether this is what happened here until we see the AHS annual report or some other budget document that will have a small note tucked away somewhere which refers to a lump sum payment in connection with re-structuring employment contracts.
Hard-nosed employers are more blunt. They’ll tell their employees they’re changing their employment contracts, offer them something (which usually doesn’t fully compensate them for what they’re being asked to give up) and then dare them to quit and sue for constructive dismissal. It’s a risky approach and one that the AHS would want to avoid for the reason suggested by your friend–it would make public yet another private-sector perk the government gave to the AHS execs.
The bonuses just drive me crazy!! I have written about Dr Chris Eagle’s salary and benefits recently on the WCPH website and am appalled at the gross (no pun intended) salary and benefits that accrue to him and many of the less well known 100 AHS executives.
Since when did it become OK to strip the PUBLIC purse of money that should be directed to healthcare initiatives?? These salaries are already out of scope for the jobs being done, and then topped up further with a bonus.
Check out the mind boggling contract for Dr Eagle here. http://www.albertahealthservices.ca/board/ahs-brd-ceo-eagle-contract.pdf. And for your added enlightenment read this article. (Apparently no amount of salary and expenses was sufficient, though he later repaid funds when exposed.) http://www.calgarysun.com/2012/10/25/expenses-for-alberta-health-services-ceo-chris-eagle-other-executives
I worked mostly in the private sector and recall a fellow employee being fired for enhancing his mileage expenses. Why were no consequences applied to the AHS employees who claimed illegitimate expenses. In my world, it counts as theft and really should be treated as such.
Liz, thanks for providing the link to Dr Eagle’s employment contract. I see that Dr Eagle’s performance targets are mutually agreed to by Dr Eagle and the AHS Board. That might explain why his targets are seen as bonus-worthy instead of simply part of his day job–the AHS Board simply doesn’t have a clue what a CEO of a health board should be doing day to day, let alone on an “at-risk” basis.
I worked in the petrochemical industry for a good part of my career. The bulk of my “pay at risk” was based on the company’s performance. Given the cyclical nature of the industry there were many lean years; the company didn’t do well and payouts on corporate performance were close to zero. Add to that stock options that expired “under water” and the payout was, you guessed it, zero. That’s what the private sector means when it talks about “pay at risk”. This is very different from the AHS paying out $90,000 of taxpayers money to a CEO who accomplished only 63% his day job.
Imagine being one of the majority of Canadians that has never received or has any idea of what a bonus is and reading about these cases in the newspaper. This particular bonus in your article is 90 thousand which is at least 3 times what some of these people make a year. This to me is the tragedy. We are becoming a banana republica and no one at the federal level talks about this inequality at all. The issue is as invisible as possible and our democratic governments go on as if nothing is happening. In fact the current federal government totally ignores the enviroment, social conditions, health care…..etc. Priorities are becoming clearer and clearer. The only big change last year was the creation of a very very needed new department. Without it I wonder what would happen to all of us. It is called the Freedom of Religion. We can muzzle librarians and scientists but religion has to be protected. I guess it makes sense, why would we allow those pesky scientists from infecting our children with thoughts of the Earth being 4 billion years old or that we evolved from primates. Can you imagine? Yes it is a sad situation indeed. Oblivious to all of this the federal government continues pointing the fingers. Especially entertaining was the cerebral comment about Hugo Chavez of Venezuela.
Carlos, another example of the federal government’s bias in favour of the wealthy at the expense of everyone else is embedded in the 2013 federal budget. On pages 144 and 145 of the Economic Action Plan 2013 the government says that in the unlikely event that an “important bank” fails the government will work with the bank to find a “bail in” solution. While this is good news for the taxpayers who won’t be required to fund a “bailout”, it’s bad news for the customers of the failed bank because the government will use their bank accounts to fund the “bail in”. This is exactly how the Cyprus government confiscated bank accounts when the Cyprus banks failed. It’s frightening to see how the “bail in” solution became part of the fabric of the Canadian banking industry and none of us knew anything about it.
I for one did not know that. I was astounded about what happened in Cyprus but no longer surprised even if that was to happen here soon. I do not believe that our economic situation is much better than anybody else, we just are now masters of spin and deceipt and we are blessed with natural resources. If one takes a serious look at our federal govenment policies there is really a lot of bone but very little meat. I no longer trust the federal or provincial governments as protectors of the public interest. Furthermore those that believe that what happened in Cyprus does not have serious repercursions are dreaming. Neo-Conservatism is finally unravelling and the tsunami will be here soon.
Carlos, a number of us have written to our MPs about this. Michelle Rempel responded to one of her constituents with a detailed reply which said the “bail in” money would not come from depositors but rather the bank’s investors. These investors would buy specially issued bonds or bank stock. The revenue from the special bonds would be put into a reserve created to cover the bank if it failed (that would be one heck of a big reserve fund!). Ms Rempel also confirmed that the “bail in” program would never touch the depositors’ accounts (insured or uninsured). Frankly the whole thing makes me nervous. For one thing, the issuance of additional bonds to generate money that goes into a reserve account would make the bank even more debt laden and illiquid than it was before. I’m not a banker but I think people would be well advised to keep an eye on how this “bail in” regime rolls out.
Susan first of all Mrs. Rempel may very well be very articulate and thinking that she knows what she is talking about but what happened in Cyprus is nothing like that at all. We have heard many things from the Conservatives before that it was just not true. This ‘Bail in’ must be another scheme to get the money legally just like they did in 2008 and abstain from having to take serious measures against those that caused all of this in the first place – lack of regulation from governments willing to serve the elites in order to benefit from it as well, saving the skin of the financial industry that now finances most of politics and on and on. With all due respect to Michele she just has to read a little more to figure out what is really going on.
The fact of the matter Susan is that the world is bankrupt and no one wants to admit it. We have now such a convoluted mess that we are just patching the potholes.The problem is that we are so adicted to spin we do not want to see the reality of the situation, most people do not even want to talk about it because it is negative news. The Conservatives, just like the Mulroney years came in to fix our finances and since they took power they have not had a deficit free year.
Susan here is one more reality. This is what is slowly happening and it is disgusting. The whole ideology stinks
Well they just keep coming. Now Gord Nixon says ‘I am sorry’ – well I believe he meant I am sorry I got caught.
I have a solution for what he did – Just find a foreign worker to replace him and he has to train him. I just want to see how he will enjoy that experience. I know, it is a bit terrifying but that is what we have to face these days in the land of the neocon law and order paradise.
Carlos, the Calgary PCs hosted the Premier’s dinner here in Calgary last night. I did not attend but a few of my friends were there. The Premier made her usual speech–I’ve kept my promise, I’m building roads, schools, hospitals, and fighting to find markets for our oil, blah blah blah. Apparently the response from the crowd was (to quote my friend) tepid. She also took a shot at the Wildrose and the NDP; painting them out to be the evil right and the evil left with only her party being the reasonable centre. I don’t think Albertans are going to buy that for much longer. This last round of budget cuts has everyone out in the streets, waving banners and protesting. It’s hard to believe we’ve come to this.
Yes Susan I have noticed she is one of those people that repeats the same over and over until she is convinced what she is saying is true.
Well she did not finish the sentence ‘Evil right, Evil left and rotten center’
Her deputy minister ( I will not say the name to avoid having a laugh attack) is apparently telling school administrators how to run their businesses more efficiently with shared resources. I wished he would do the same.
The oil companies best saleswoman (aka premier of ALberta) went to Washington again this time defending our brilliant environmental record – Do nothing and they will forget we exist.