We are modest and moralistic in Boston. The lead story in the May 1 Boston Globe criticized Vertex Pharmaceuticals for approving a plan to pay a dozen executives a total of about $54 million if the company becomes profitable, something that has taken 25 years to achieve. If the company becomes profitable it will be because it successfully launches a new drug that will improve the lives of people with cystic fibrosis. Sounds pretty good to me.
The bonuses represent an insignificant percentage of the $15 billion increase in Vertex’s market value in the past 12 months. Critics can complain all they want, juxtaposing the high prices insurers pay for medication with the bonuses awarded. I just don’t see this as a headline issue.
Meanwhile the New York Times yesterday led off with an article about the top paid hedge fund managers (For Top 25 Hedge Fund Managers, a Difficult 2014 Still Paid Well). The top 3 managers each made about $1 billion. That’s right, each one made 20x what the dozen Vertex managers might be due for collectively. To make it to #25 on the list required earning $175 million, still far, far above the Vertex dozen. Oh, and by the way most of the hedge funds had mediocre performance in 2014, in the low single digits, and their operations didn’t contribute much, if anything to improving society.
Some of the funds employ scientists (physicists and astronomers are two examples provided) to help with their trading, yet they earned returns far lower than the non-geniuses who bought and held the S&P 500. Vertex critics are up in arms about taxpayers indirectly paying executive bonuses, but maybe they should instead scrutinize public entities such as pension funds that are paying large fees to hedge funds.
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