Health & Wall Street CEOs - Some Similarities

Large non-profit health systems boards tend to be fairly homogeneous. Individuals, matched to matrices, may reflect different genders, races, ethnicities and religions, but the board members tend to be recruited by board officers (often after being identified by systems' CEOs) for the conformity with the outlook and philosophy of the existing board and the person who identified or recruited them.

Depending on the precise terms of the employment agreement between the CEO and the system, it is not unusual to have a reopening/renegotiation of the CEO's employment contract every few years. That process may be handled through a small committee of the board including the chairperson, the vice chairperson and the chair of the board finance committee which conducts most of its work privately. The CEO provides access to industry comparable salary levels with which the committee works.

Sounds reasonable, doesn't it? But ask: who selects the board chair, vice-chair and finance committee chair? Although they are appointed by the board and are independent, the CEO often has a lot to say (often helping to identify them to serve on the board and keeping them in his or her loop).

And how are the industry-comparable salary figures generated? One way is through surveys by large employment consulting companies which query other CEOs' institutions as to what they are being paid. The results in a leveraging of salaries as CEOs provide information which shows increasing salaries for their class of employment. If no contract agreement is reached, the CEO knows which employment consulting company will offer help in finding a new job and the consulting company knows who is looking for a CEO position.

Then, something very interesting occurs. Each board dreads the idea of firing its CEO and going through the painful process of having a fill-in CEO while a job search is done. And (perhaps biased by their own image of accomplishment) boards tend to believe that their CEO is better than average and thus worth more than the average.

So, as the health care delivered by an institution becomes more mediocre, and the institution exports its problems to other institutions (making itself more profitable)CEOs' salaries rise.

Sounds just like Wall Street financial executives, doesn't it?