Michael Moore’s Sicko and Some Thoughts About Ethical Compensation Practices

I saw Michael Moore’s Sicko on Saturday night in a packed house in suburban Philadelphia. And I was sickened about the people who create unethical bonus plans.

Yes, this one’s for you, the people who head up compensation functions or consultants who provide advice. I’m going to get a little esoteric, but mostly I’m going to rant.

Here’s the deal: There’s a piece in Sicko about a doctor who’s testifying to Congress about her role in “killing patients to save money for her company.” She was the medical director of a major insurance company, and her job was to deny claims. Lots of them. Know what the beauty was? Her bonus was tied to how many claims she denied.

This is the part where my blood boiled.

How in the hell can someone create a bonus structure that rewards people for denying legitimate claims? I’m not talking about bogus claims here. I’m not talking about a company’s right to make money — I definitely think they should. I’m not talking about good bonus structures. I’m talking about creating bonus and pay structures that encourage unethical behavior.

Just don’t do it.

Here’s my take on Compensation’s professional responsibility:

  1. Don’t create bonus plans that you wouldn’t be proud to describe to your grandmother.
  2. There’s nothing wrong with making money, but encouraging people to make money the wrong way is just wrong.
  3. When you’re designing pay structures, ask yourself “Is this ethical?” as often as you ask “Will this make the company money?”
  4. Your job is to coach business leaders to do the right thing. It’s not enough and it’s not professional to “just take orders.”
  5. If you know it’s wrong, it’s wrong. Stand up. Speak out. Get a backbone. That’s your job.

I tell you, I was embarrassed to think about that bonus scheme in Sicko that encouraged medical directors to make life-or-death decisions based solely on P&L and the effect it would have on their bonus. Sickened.

And if being ethical is wrong, I don’t want to be right.

Posted on July 24, 2007 by Frank Roche 
Filed Under Culture, Ethics, Executive Compensation, Pay

Comments

6 Responses to “Michael Moore’s Sicko and Some Thoughts About Ethical Compensation Practices”

  1. Sarah on July 24th, 2007 11:24 am

    I am a capitalist, I believe that when the people at the top of the house make lots of money, it motivates some people to work harder to try to get one of those jobs (people sometimes look at CEO pay as winning the lottery). In Sicko, the consequences of the bonus plan smack you in the face. That drama is frequently what it takes to get people to understand that they need to evaluate any other behaviors a bonus plan might elicit and evaluate the many potential unintended consequences. Some are not important and cause not harm. Lives are precious. Tools aren’t precious. But even the cleaning and maintenance of machinery matters… for example, an assembly worker who is rewarded for output has no incentive to keep his or her tools clean and tuned so they will last longer (saving the company money). Anyone who is rewarded for output may not step up and do the other things that are vital to the long-term health of the company. Things that are harder to measure, e.g., mentoring. This suggests that scouring the plan for unintended consequences as often as you ask if your plan is ethical and as often if you ask if it will help you make money is also vital. I am still a capitalist… I think these are capitalist arguments. Michael Moore probably wouldn’t like that characterization. But, get both sides on board and maybe we can do something about it.

  2. Steve on July 24th, 2007 11:48 pm

    Well said and well written Frank.

    I always look forward to your posts. I’m not sure when Sicko will make its way to Osaka, Japan, or if it will be deemed worthy of a run here, but I look forward to it even more now thanks to your “rant”.

  3. Frank Roche on July 25th, 2007 5:41 am

    Steve, thanks….I got pretty hot about this one. Hopefully the movie will make its way to Osaka…and hopefully your healthcare there is better than in the States…Moore made the movie for the 250 million Americans who HAVE health insurance. They’re the ones featured, and it’s scary. So are unethical pay practices. Yikes!

  4. Linda on July 25th, 2007 7:12 am

    Hello,

    I am the doctor whose testimony was included in “Sicko,” and I just wanted to thank you for your outrage about the business practice of rewarding employees for limitation and denial of care. An entire documentary could be made about that practice alone. I have spent nearly two decades trying to get the public, professionals, policy makers, researchers, etc. to examine that issue in more detail, and have been amazed that more people have not had your reaction.

    In addition to the direct bonuses given to medical reviewers and directors like me for denials, some companies have compensation schemes in which all the employees get some kind of bonuses or increased compensation for increasing profits, which, of course, are most directly increased to the extent that money isn’t paid out for claims. So the more substitution, limitation, interference, delay and denial of care, the more money “saved” (or made) and the more employees receive. This kind of simple equation has spawned lots of sophisticated practices that are insidious and dangerous to patients.

    Also, this kind of increased-compensation-for-decreased-care practice even trickles down to some treating physicians and other providers who enter into “capitation” arrangements that pay them a fixed amount per patient regardless of what they do. Their financial success depends upon spending as little as possible of that pool of money, so the “best” patients are the ones who get no tests, no treatments, etc. Imagine then how a physician, with the power of life and death decision-making, will “manage” a patient with potential serious disease? How could a patient ever know what is not being offered to them out of financial motivations?

    If there is any other information that you or your readers would like to know, please don’t hesitate to contact me.

    Linda Peeno

  5. Frank Roche on July 25th, 2007 8:09 pm

    Hello, Dr. Peeno. Well, wow. I feel very strongly about this issue, and I think there’s much to be done to make this right. Your comments make it clear that there’s so much to know and so much to do.

    I’d really like the opportunity to talk with you. I’ll send you a personal e-mail about that. I think it’s high time for HR professionals to get involved in the issue of ethical compensation and you’ve been leading the charge.

    Thanks so much for your considered comments here. I’m honored…and looking forward to talking with you.

    Cheers.

  6. Linda on July 26th, 2007 4:13 pm

    Frank,

    I would be happy to talk with you and any other of your readers. I look forward to any chance I can to educate others about the complexities we face.

    Linda

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