Highmark CEO compensation tops $6M

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Last year, Highmark Inc. dished out more than $6 million to compensate its three CEOs.

In compensation figures filed with the state Department of Insurance this month, the state's largest insurance company said it paid former CEO Kenneth Melani $3.3 million in 2012, even though he was fired April 1. He was the highest-paid company employee for the year.

In fact, three of Highmark's 10 highest-paid employees in 2012 are no longer with the company, having left early in the year. In addition to Dr. Melani, former Highmark legal officer and corporate secretary Maureen Hogel and retired auditor and compliance officer Elizabeth A. Farbacher also had left Highmark by April.

Current Highmark CEO William Winkenwerder Jr., who was hired over the spring and began work July 16, took home $1.87 million in total compensation -- $562,712 for his half-year of salary, plus a $1.18 million bonus and $131,000 in "other" compensation.

Dr. Melani made $290,000 in salary through the first three months of 2012, plus $3.3 million in 2012 bonuses and $315,000 in other compensation.

The Pittsburgh-based insurer spent about $1.9 million in 2012 paying its 19 board members.

At the top of the list was J. Robert Baum, chairman of the board, who made $81,789 for his board work and $310,725 in "other" compensation. That other compensation was paid out because Mr. Baum, in between Dr. Melani's firing and Dr. Winkenwerder's hiring, pulled double-duty as Highmark's interim CEO.

Aside from Mr. Baum, Highmark's board members took in as much as $124,787 (physician David Blandino) in "paid or deferred" compensation, or as little as $58,043 (Thomas R. Donahue, Federated Investors).

"Although Highmark is a nonprofit corporation, we compete against much larger publicly held health insurance companies. We must recruit and retain qualified and experienced board members with diverse business, financial, clinical and legal experience," said Michael Weinstein, a Highmark spokesman.

Those board members, he said, will help Highmark deal with the implementation of health care overhaul and the development of Highmark's new hospital network. The board compensation, he said, is comparable to -- and bench marked against -- similar companies, including other Blues insurers.

It's common for insurers, even nonprofit Blue Cross Blue Shield insurers, to have paid board members.

Pennsylvania's three other Blues insurers also pay their boards of directors.

UPMC and West Penn Allegheny Health System, on the other hand, do not. Corporate ethics experts are of mixed opinions when it comes to paying nonprofit board members.

Some prefer board appointments be voluntary, in keeping with the spirit of a nonprofit with a charitable mission. But paying board members also promotes "professionalism" and can create a range of economic diversity, "giving members an opportunity to serve who might otherwise be unable to do so," according to the Washington, D.C., Center for Association Leadership.

Former Allegheny County Executive Dan Onorato, who took a job as Highmark's communications and external affairs chief after leaving office in 2012, was not among the insurer's 10 highest-paid employees and did not appear on the compensation exhibit submitted to the insurance department.

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Bill Toland: btoland@post-gazette.com or 412-263-2625.


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