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Because I am not shy about criticizing or challenging my industry – healthcare – when we fail to live up to our mission of quality/safer patient care and support for the communities we serve, I owe it to my colleagues to voice my support when I believe they get it right.  They have in one very important area.

Executive compensation continues to be a hot subject both in the U.S. and Europe.  Not a week goes by without a news report, analysis or essay on the subject. While the current lightning rod is the large investment banks, there are far too many public corporations that are guilty of bad practices in how they pay their executives and how they explain it publicly.  

The central issues giving life to this continuing flow of coverage on the subject are the size of the base salaries and/or bonuses, the relationship between the pay for some easily understood performance metric, and the rights of shareholders – or the lack thereof – when the “owners” of the company are not happy with size or justification for the genrous awards.

Executive compensation issues and the financial community’s sense of entitlement, continues to irk regulators, millions of small business owners and “average Joes” everywhere.  The large banks single handedly drove this country to the verge of a global credit market contagion.  However, the continuing problems and lack of transparency in executive compensation are not confined to the banks.  There are hundreds of examples of corporations throughout the U.S. and Europe that treat shareholders as troublemakers of the worst sort if they deign to believe they are entitled to any rights  to have a meaningful say on this issue.

In healthcare delivery, we have kept our wits about us on executive compensation when other industrial and service sectors lost their way. We are not perfect, but our industry does remarkably well, all things considered. 

While there are health system and hospital CEOs who earn high six and low seven-figure incomes – and they are the exception – there are few examples where the size of compensation of a hospital CEO is inconsistent with the scope of responsibility and the complexity of the challenges these executives face.  In fact, there are examples aplenty of hospital CEOs of difficult-to-manage public and mid-sized community hospitals who are underpaid for the work they do and the results they produce. 

I am not going to discuss the payor or pharmaceutical segments because I lack the expertise.  My search firm does not work in those areas, but I believe there are certainly examples of these bad  compensation practices in the health insurance, technology, and pharmaceutical segments.

Health system and hospital boards, for the most part, are responsive to their communities and tend to be prudent in evaluating the CEO and how they pay him or her for the results they produce.  No, community boards are not as transparent as they should be in some markets, but even in the worst of cases, they are infinitely more responsive than the boards of far too many major public corporations who have created more rules and hurdles to block true shareholder input into how the company is run.  It is a maddening situation for many mom and pop investors, and increasing numbers of institutional investors, who are tiring of the corporate arrogance and greed.

Hopefully, as community healthcare organizations deal with the immense challenges that are part and parcel of our “new normal” economy, persistent high unemployment and anemic growth rates, their boards will become more transparent, not less, and more communicative, not less, regarding the size and scope of their community benefit which is how they justify their tax-exempt status.

Big corporations may have a legal requirement to be more forthcoming, but community healthcare providers have a moral and ethical duty.  And there is a big difference.  

© 2011 John Gregory Self