Employees vs. a parachute

Employees vs. a parachute

January 12th, 2012 in Opinion Times

The decision by Erlanger Hospital's board, on a narrowly divided 5-4 vote, to award departing CEO Jim Brexler a $728,000 severance package is bound to further depress morale of the hospital's employees. Many of the several thousand employees are now being asked by the hospital's interim chief executive to take 12 unpaid leave days before March to help the hospital shave $1.4 million off its current losses, which amounted to $6.38 million in the first half of the current fiscal year. Now they will watch Brexler leave with a golden parachute worth over half of the hospital's savings that their lost wages by March will represent.

The unfairness is palpable. It reflects precisely what too many Americans have frequently learned the hard way in recent years. CEO's forced to leave large businesses when their leadership falters usually get to leave with a fat severance package - Brexler's amounts to a 15-month payout at his annual rate of compensation - while laid-off and furloughed workers who need every dime of their weekly wages to pay for groceries, utilities and mortgages take it on chin, even if they have been doing a good job.

Board member Richard Casavant, one of the four who voted against the package, reasonably criticized the decision, which largely hinged on whether Brexler's recent job performance was poor enough to prompt his termination for cause. Under his contract, Brexler could argue he was due an 18-month severance package unless he was terminated for cause, in which case he would not qualify for such a large payout.

Casavant argued that Brexler "ought to be terminated with cause." James Worthington agreed. "Had we taken the time to search for cause, we would have found an abundance of reasons why we could take action based on cause and terminate accordingly."

They cited plausible arguments for that view. A recent survey by the hospital showed that doctors who practice at the hospital have been unhappy with Brexler's leadership. Indeed, a number of physicians have moved their offices and patients to other hospitals, aggravating the hospital's mounting losses. Its losses, as well, have slipped further than the $6.4 million total: The hospital's administrators had previously predicted that Erlanger would be $3.96 million in the black by last November. Taken together, that amounts to slippage of $10.4 million.

Erlanger is not the only hospital with falling revenue. Here and elsewhere, many people have postponed or deferred optional surgeries since the Great Recession of 2008 set in. At the same time, admissions of higher numbers of unemployed and uninsured workers have taken on a toll on Erlanger's revenues, pushing its annual bill for indigent care to around $80 million.

Still, Erlanger's revenue performance has lagged its local competitors, and Brexler's financial maneuvers couldn't hide that. The board members who chose to reward him despite the hospital's poor performance wrongly shifted some of his losses to their steadfast employees. There is no fairness there.