The CEO Who Made a Fortune While His Hospital Chain Collapsed | Hacker News Reader

The CEO Who Made a Fortune While His Hospital Chain Collapsed

wsj.com

19 pointsViktorRay18 comments

> While it was losing hundreds of millions of dollars a year, Steward paid at least $250 million to its chief executive officer

Can somebody explain to me the reasoning behind these payouts? Isn't this an incredible incentive for ceo's to make unsustainable changes, that look good by the time the bonus is payed out, but then destroys the company in the long run? But at that point this CEO is ofc already long gone with his 250mil ?

Theoretically, the board of directors would intervene to prevent this. But in practice, boards are 'captured' entities filled with relatives and cronies of the CEO. So, the answer is that yes, the incentive exists for CEOs to rape a company for personal benefit. And it happens frequently.

Is there a legal mechanism which might prevent, or penalize the capture of boards of directors? It's an obvious conflcit of interest, but I'm not sure if it's illegal.

Sometimes. A recent example of this is Elon's giant pay package from Telsa. A shareholder sued saying it was unjust enrichment and the board was full of cronies. The shareholder won, initially. But then Musk moved the incorporation of Tesla from Delaware to Texas where he knew he'd get less resistance from the law. So he got what he wanted eventually.

https://www.cbsnews.com/news/elon-musk-pay-package-vote-cbs-....

edit: Looks like I was incorrect about some of the details on Elon's pay suit as commenters have identified below. However the gist is that there exist legal avenues to reign in CEOs, but I can't think of any example where they have been ultimately successful.

Elon got what he wanted by repeating the shareholder vote. The move from Delaware to Texas had not yet happened at the time of the repeated shareholder vote.

*only applies to publicly traded companies

that's not quite right.

the court case was about whether the Company had sufficiently informed shareholders of the fact that the board was full of cronies.

the re-vote information included details of the court case they'd just lost on the topic, presumably making the shareholders sufficiently informed about how corrupt the board was. in addition, to avoid the hippies of the Delaware Chancery court ever doing anything he didn't want in future, Musk also re-domiciled the company to Texas.

> Can somebody explain to me the reasoning behind these payouts? Isn't this an incredible incentive for ceo's to make unsustainable changes, that look good by the time the bonus is payed out, but then destroys the company in the long run? But at that point this CEO is ofc already long gone with his 250mil ?

the reasoning is the board were negligent

> Dr. de la Torre made more money as a heart surgeon than in his first years as a corporate CEO

Something is going wrong if you're making as a heart surgeon more than a corporate CEO because who pays for this? Is this making healthcare inaccessible to those who need it so someone can buy a yacht or two?

I’m willing to bet you can find a capable CEO more easily than you can find a capable heart surgeon. There is no rigorous CEO school. MBAs aren’t a prerequisite. There is a fairly rigorous medical degree requirement if you want to be a highly specialized surgeon...

Which leads back to the supply of doctors, which depends on the limited number of med schools available and residency slots, and scope-of-care restrictions. (Eg, see https://skeptics.stackexchange.com/questions/4561/does-the-a... and https://blog.petrieflom.law.harvard.edu/2022/03/15/ama-scope... )

Something is wrong with the whole system of how people are compensated for their work; a Starbucks employee shouldn’t have to rely upon the good graces of their customers (tips) to earn a living wage, either.

That being said, a heart surgeon has a very specific and wide-ranging set of knowledge and skills which not many people could have, not to mention the incredible amount of stress they’re under.

Honestly in a 'Just' system I think the heart surgeon is supposed to make more than a CEO

I don't really know. Both should be doing reasonable well, but what is the impact of single surgeon? How many people can they heal a day?

Where as well managed hospital run by CEO could impact lot more people effectively each and every day. Not that that pay should be insane either...

Yes, but a manager could leave for an extended period of time without any real impact. If a doctor leaves the surgeries and treatments actually stop.

There are worker-coops that function perfectly well without a management layer leeching of actual productive people.

I mean practically I agree that some management is a good idea long term, and it's most efficient to have specific people for that, but to say that they are as important as the actual workers is ridiculous.

> Honestly in a 'Just' system I think the heart surgeon is supposed to make more than a CEO

Yes, but in a just system they'd both also make less than they do now. Maybe ~$200k/year total compensation, say?

IIRC, surgeons had the prestige and power when the fundamentals of the modern American medical billing system were established, so "procedures" pay better than office visits, and surgeons get compensated waaay more than other doctors because they do lots of procedures.

https://archive.is/3ofL4

Reply on news.ycombinator.com