For-profit hospital operators need to ensure their compensation advisers do not have conflicts of interest within their companies, and those rules also apply to non-profit health systems, according to an article in a Governance Institute (pdf) newsletter.
Compensation advisers hold a vast amount of responsibility, as their input and studies dictate what executives may be paid. Tim Cotter of Sullivan, Cotter and Associates wrote about eight main factors hospitals should consider when assessing the independence of their compensation advisers.
1. Other advisory services. A hospital's compensation adviser should really only work on services authorized by the compensation committee. Other activities with major fees — such as auditing and other general consulting — may be seen as a conflict of interest.
2. Adviser revenue. "The [compensation] committee should determine whether an adviser's independence is compromised if the engagement represents a significant portion of the advisory firm's revenue," Mr. Cotter wrote.
3. Business and personal relationships. While casual relationships among advisers, CEOs and other pertinent compensation committee members may be fine, all business and personal relationships should still be disclosed.
4. Conflict policies. A hospital would be prudent to ensure the adviser's firm has a good set of policies regarding conflicts of interests.
5. Miscellaneous areas. Other factors to consider when assessing a compensation adviser's independence include financial interests in other healthcare organizations, paid speaking engagements between the advisory firm and senior executives and other gray areas involving payments and perquisites.
Compensation advisers hold a vast amount of responsibility, as their input and studies dictate what executives may be paid. Tim Cotter of Sullivan, Cotter and Associates wrote about eight main factors hospitals should consider when assessing the independence of their compensation advisers.
1. Other advisory services. A hospital's compensation adviser should really only work on services authorized by the compensation committee. Other activities with major fees — such as auditing and other general consulting — may be seen as a conflict of interest.
2. Adviser revenue. "The [compensation] committee should determine whether an adviser's independence is compromised if the engagement represents a significant portion of the advisory firm's revenue," Mr. Cotter wrote.
3. Business and personal relationships. While casual relationships among advisers, CEOs and other pertinent compensation committee members may be fine, all business and personal relationships should still be disclosed.
4. Conflict policies. A hospital would be prudent to ensure the adviser's firm has a good set of policies regarding conflicts of interests.
5. Miscellaneous areas. Other factors to consider when assessing a compensation adviser's independence include financial interests in other healthcare organizations, paid speaking engagements between the advisory firm and senior executives and other gray areas involving payments and perquisites.
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