Agenda for the Executive Compensation Committee: A Guide for Minimizing Regulatory and Reputational Risk
by Timothy J. Cotter
Editor’s Note: This article outlines agenda items for the board’s Executive Compensation Committee. It is the first of several that will further explore many of the agenda items discussed below.
The rapidly changing health care market has created significant demand for executives with proven leadership capabilities, often accompanied by highly competitive compensation arrangements. At the same time, health care executive compensation continues to be a focus for regulators, politicians, unions, the media and organizational stakeholders. Thus, the job of the executive compensation committee is more challenging than ever.
Committees serving not-for-profit health systems and hospitals must successfully attract and retain high-performing executives while minimizing regulatory and reputational risk. Part of the committee’s role is to establish practices that maximize informed decision making and mitigate risk.
In this environment, where intense scrutiny is the new normal, compensation committees should conduct a comprehensive risk assessment and adopt agenda items that will help identify exposure associated with failures to:
- Ensure that compensation is aligned with changing business conditions and strategies.
- Adopt best practices in governance.
- Preserve and enhance the image of the organization. (See Figure 1 on page 2)
By identifying these issues up front, and addressing the 10 agenda items outlined below, the committee can make informed decisions and take steps to manage these risks proactively, rather than waiting until they are identified.