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Originally Published MX July/August 2004

BUSINESS PLANNING & TECHNOLOGY DEVELOPMENT

What Programs Are Medical Device Companies Sponsoring?

A study conducted by Top Five Data Services Inc. (Fremont, CA) indicates that medical device companies sponsor many of the executive compensation programs that are currently being examined by the IRS. Top Five looked at executive compensation programs maintained by 20 public medical device companies and determined the following (see Table).

Stock-Based Compensation. All of the companies use some type of equity program for their executives, with 90% of the group using nonqualified stock options and 45% using restricted stock (some companies offered both programs). The only companies in the survey that do not use nonqualified stock options are subsidiaries of foreign corporations.

Nonqualified Deferred Compensation. These types of programs are popular with large medtech firms. Of the large companies surveyed, 90% maintain at least one nonqualified deferred compensation program for their executives; 70% maintain two or more plans. However, only 20% of small companies offer these types of programs for their executives.

Golden-Parachute Arrangements. Small companies are concerned about being acquired. Of the small companies surveyed, 90% offer employment contracts with "golden parachute" provisions or severance payments to support executives in the event of a change in control by the employer. Only 50% of the large firms offer such agreements.

Fringe Benefits. Large firms tend to offer more fringe benefits than do small firms. Although the large firms provided more detail in this area, some clear trends are apparent, including the following.

  • Financial planning is the perk most commonly offered by large firms (80%); it is not as popular with small firms (10%).
  • Life insurance is the perk most commonly offered by small firms (40%), and is also widely offered by large firms (60%).
  • Among large firms, automobile allowances or use of company cars is a widespread offering (70%), as is personal use of the company plane (40%); small firms expect executives to use their own resources for transportation—only 10% offer a car and none offer a company plane.
  • Country and athletic club memberships are not as prevalent as popular thinking may lead people to believe. Only 30% of large firms and 10% of small firms provide executives with this benefit.

Tier One
Tier Two
Bayer HealthCare (Leverkusen, Germany) American Medical Systems Inc. (Minneapolis)
Boston Scientific Corp. (Natick, MA) Cantel Medical Corp. (Little Falls, NJ)
C. R. Bard Inc. (Murray Hill, NJ) Cooper Companies, Inc. (Lake Forest, CA)
Dade Behring Inc. (Deerfield, IL) Cytyc Corp. (Boxborough, MA)
Guidant Corp. (Indianapolis) Datascope Corp. (Montvale, NJ)
Johnson & Johnson (New Brunswick, NJ) Hologic Inc. (Bedford, MA)
Medtronic Inc. (Minneapolis) Integra LifeSciences Holdings Corp. (Plainsboro, NJ)
Roche Diagnostics Corp. (Indianapolis) Intuitive Surgical Inc. (Sunnyvale, CA)
Steris Corp. (Mentor, OH) Thoratec Corp. (Pleasanton, CA)
St. Jude Medical (St. Paul, MN) Zoll Medical Corp. (Chelmsford, MA)
Table I. Public medtech companies surveyed by Top Five Data Services Inc. (Fremont, CA), to determine their practices with regard to executive compensation. Tier One companies reported annual revenues of more than $1 billion in 2002. Tier Two companies reported 2002 annual revenues between $115 million and $500 million.

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