A recent
article discusses how buybacks at Humana earned CEO Bruce Broussard a $1.68
million bonus in 2014. Humana was on target to miss its target EPS of $7.50.
However, the company announced a stock buyback of $500 million, which increased
EPS to $7.51, triggering the bonus. In all, 255 of the S&P 500 companies have
executive performance tied in part to EPS. As we have discussed, in our
opinion, EPS is not an appropriate measure of performance as it is easily
manipulated. Executive bonuses should be tied to measures that better align
with increases in shareholder value. As an example of EPS manipulation, the article reports that, in 2012, then-CEO of
Humana Michael McCallister received a $1.63 million bonus because the Board of
Directors removed litigation expenses from the EPS calculation.
