For more than a decade, Beebe Healthcare, a 155-bed not-for-profit hospital in Lewes, Del., assigned executive compensation duties to the hospital board's executive committee. The panel reviewed national salary data, followed the board's compensation philosophy and set pay for C-suite leaders.
But more than a year ago, at the urging of a consultant, Beebe decided to make a change. In 2014, the hospital's leadership created a separate five-member compensation committee made up of the hospital board chair and four community business leaders. “They have a lot of experience and understand the importance of having a compensation system that is fair and allows the organization to attract and retain the people we need to run our healthcare system,” said Jeff Fried, Beebe Healthcare's longtime CEO.
Unlike the executive committee, the new compensation committee is independent and has no conflicts of interest, he added. For instance, some of the executive committee members were affiliated with the hospital, which could make compensation review difficult.
In addition, the compensation committee focuses solely on issues related to compensation, including step-by-step compliance with regulations governing executive salaries. That's important at a time when not-for-profit healthcare executive pay is coming under growing public scrutiny.
While most large not-for-profit hospitals have a separate compensation committee, many smaller ones still do not, said Ken Ackerman, chairman emeritus of Integrated Healthcare Strategies, a Minneapolis-based consulting company that advised Beebe to form such a committee.