Questions Raised About Compensation and Conflicts at Duke 5

A group of Duke students protested the excessive compensation given to some top Duke officials, including cardiologist Victor Dzau, who is the Chancellor for Health Affairs at the University. In response to the protest, one noted advocate for health care reform says that Dzau has enriched himself even further through service on four separate corporate boards, and that Dzau or Duke has been less than forthcoming about fully disclosing Dzau’s board memberships.

The protesters took issue with Dzau’s total compensation for 2009 of more than $2.2 million. The figure appears excessive, especially in the context of recent financial difficulties at Duke, resulting in “frozen pay and eliminated jobs,” according to newsobserver.com.

But Dzau’s compensation at Duke is far from unusual, according to Roy Poses, writing  on Health Care Renewal. He notes that compensation for “leaders of not-for-profit organizations, including academic institutions, is now often in the millions per year range.”

But what is striking in this case, according to Poses, is the large sums of money Dzau receives from sources outside of Duke. In particular, Dzau serves on several corporate boards, Alynlam Pharmaceuticals, Genzyme, Medtronic, and PepsiCo, though his biography on the Duke website lists only his Genzyme affiliation.

Here are the details of Dzau’s corporate compensation for 2009, as reported by Poses:

  • According to the Alnylam Pharmaceuticals 2010 Proxy Statement, Dr Dzau’s compensation as a director in 2009 was $234,433.  In 2009, Dr Dzau owned the equivalent of 45,000 shares, worth $424,800 at today’s $9.44 price per share.
  • According to the Genzyme 2010 Proxy Statement, Dr Dzau’s compensation as a director in 2009 was $412,942.  In 2009, Dr Dzau owned the equivalent of 75,137 shares, worth $5,312,937 at today’s $70.71 price per share.
  • According to the Medtronic 2010 Proxy Statement, Dr Dzau’s compensation as a director in 2009 was $173,698.  In 2009, Dr Dzau owned the equivalent of 14,552 shares, worth $493,895 at today’s $33.94 price.
  • According to the PepsiCo 2010 Proxy Statement, Dr Dzau’s compensation as a director in 2009 was $260,000.  In 2009, Dr Dzau owned the equivalent of 25,065 shares, worth $1,622,458 at today’s $64.73 price per share.
  • So, in summary, in 2009, Dr Dzau received  $1,081,073 in compensation to be a director of these four companies.  In 2009, Dr Dzau owned stock or equivalent in these four companies valued at $7,854,090.  He has become what most people would consider rich just from his work on these boards, in addition to the millions he has received from Duke.

Poses raises several important questions about these issues, but focuses on the conflict of interest angle. He asks why Duke doesn’t fully disclose all of Dzau’s relationships and observes that all these companies represent “severe conflicts of interest” for Dzau:

Dr Dzau’s service on the board of each of these companies means he has fiduciary duties to each company, and is supposed to show unyielding loyalty to the companies’ stockholders…. Even in the best case, showing unyielding loyalties to the stockholders of companies that make drugs, medical devices, and sugary drinks seems to be likely to influence a leader of an academic medical institution in ways that risk degrading the leader’s responsibilities to uphold the institution’s mission, i.e., to create severe conflicts of interest.

Poses then asks what is Dzau’s degree of responsibility for some of the troubling, well publicized episodes that have plagued Genzyme and Medtronic in recent years. He points out, for instance:

Medtronic has been the source of several alleged conflicts of interest involving influential physicians. (see posts about Medtronic here).   Maybe someone could ask Dr Dzau what he thought about such actions, and whether he would take any responsibility for them.

Surprisingly, Poses doesn’t focus on Dzau’s involvement with PepsiCo, which strikes me as the most troubling of all. As a prominent and influential health care leader, how could Dzau treat a tax on soda, or a ban on vending machines in schools, or any of a multitude ofother health policy issues relating to the obesity and diabetes epidemic? In addition, might Dzau’s involvement with PepsiCo (and the other companies) produce a chilling effect on the free speech and activities of Duke faculty and affiliated doctors?

About these ads

5 comments

  1. Here is the link to all three street theater actions:

    http://www.youtube.com/user/mgates333

    I am trained (at Yale) as a bioethicist. Things are so institutionally tricky that we are, indeed, resorting to street theater. This is what we must do here in the medical-industrial-academic complex of the Bermuda Research Triangle.

    Peace!

  2. This is a remarkable story, for two reasons. First, it is mindboggling to consider what the definition of “health” must be for someone who has signed on to simultaneously ensure the profitability of Geynzyme, Medtronic and Pepsico. That such a person could then be feted with the title “Chancellor for Health Affairs” by Duke University beggars belief. That this is indeed the state of affairs raises the second remarkable feature of this story: that the situation is being discussed in public. What kind of a world are we living in when it goes without saying that it is none of our business which corporate boards the guardians of our health sit on. Of course there is conflict of interest here. The interesting question is whether Dr. Dzau will choose to respond in public with a show of offence at the suggestion that this equates to conflict of interest, or will defend it as perfectly normal and appropriate behaviour for CEO doctors.

  3. Pingback: Walking With the American Heart Association: Valerie Bertinelli and Chester Cheetah « CardioBrief

  4. Pingback: Newly Elected President Of Institute of Medicine Is On The Pepsico Board Of Directors « CardioBrief

What do you think?

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s