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Stephen F. Wiggins, former chairman and chief executive officer of Oxford Health Plans Inc., took a 61% cut in total pay last year as the once-highflying managed-care company he founded suffered huge losses and a dramatic plunge in its stock price.
All but one of the six other highest paid executives of the company, based in Norwalk, Conn., also had lower pay in 1997 after the compensation committee of Oxford’s board withheld cash bonuses “as a consequence of the losses,” the company said in a filing with the Securities and Exchange Commission.
Separately, Standard & Poor’s assigned a “single-B-minus rating” — one of its lowest rating classifications — to Oxford’s proposed junk-bond offerings totaling $350 million that are critical to the company’s turnaround plan. The ratings agency said the recent losses and the expectation of further deficits this year “have substantially impaired the company’s consolidated financial profile,” and that it expects it will take 12 to 18 months to shore up margins in its underperforming product lines.
Both developments are further evidence of the challenges facing the beleaguered HMO Company, which reported a loss of $291.3 million, or $3.70 a share, for the year after a disastrous computer system conversion and other problems led it to lose control of its finances. Last week, it reported a first-quarter loss of $45.3 million, or 57 cents a share. The company’s shares closed Friday at $17.1875, up 6.25 cents in trading on the Nasdaq Stock Market, about 80% below the record high of $89 last July.
Among other things, the difficulties precipitated a major management shakeup: Just two of the seven executives listed on the report remain as employees of the company. They also forced the company to seek $700 million in financing to stabilize its financial position.
Mr. Wiggins, who resigned as chairman in February but remains a director, was paid a total of $682,093 last year, including a 4% rise in salary to $623,077. His 1996 compensation was $1,741,599, including a bonus of $1.1 million.
William Sullivan, who was promoted to chief executive officer last August, took a 3% pay cut nevertheless, to $527,152 after a $232,000 raise in base salary was offset by the lack of a bonus, which totaled $250,000 in 1996. Mr. Sullivan, who remains with the company, will resume his position as president when Norman D. Payson officially takes the helm as CEO. Mr. Sullivan’s base pay this year will be $600,000.
The only senior executive to receive a raise was Jeffrey H. Boyd, executive vice president and general counsel, whose total pay of $607,365 amounted to a 42% increase over 1996 and included a bonus of $250,000 that the compensation committee said reflected his efforts responding to “legal and regulatory inquiries and proceedings affecting the company.”
Four other executives, David B. Snow, Jr. and Robert M. Smoler, both former executivevice presidents; Andrew B. Cassidy, former chief financial officer; and Paul Ricker, former vice president and chief information officer, all took pay cuts of 20% to 24%, largely reflecting a lack of a bonus. All have recently resigned amid Dr. Payson’s steps to bring in a new senior management team.
All the executives also received options to purchase from 60,000 to 100,000 shares last year, but they aren’t likely to have much value any time soon: the exercise price is $74 a share, more than quadruple the current price of the stock. The filing notes that options granted by the company last year to employees other than these executives were effectively re-priced to $17.125 a share in an effort to “provide a meaningful incentive to motivate and retain employees.”
The Standard & Poor’s single-B-minus rating applies to the company’s proposed $150 million five-year senior secured term loan and to its proposed $200 million seven-year senior unsecured notes.
The ratings agency noted Oxford has a strong market position in the metropolitan New York regions, but it said the company’s credit standing was hurt by “poor operating performance,” reflecting its inability to manage its growth and “its weak internal financial and operating control mechanisms.” S&P’s said it expects Oxford’s operating performance to improve in 1999.
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