Regulators and community members continue to keep a close eye on executive compensation in nonprofit hospitals. Human resources firm Mercer found that in response to this scrutiny, governance practices around executive compensation have evolved.

A recent survey reveals that nonprofits have taken several steps to manage the reputational, regulatory, and recruitment and retention risks associated with executive compensation, though these practices are more prevalent in the largest organizations (defined as $1 billion or more in net revenues). Board compensation committees in these hospitals tend to have a broader scope, meet more often and have more formal structures.

Other results include:

  • Ninety-four percent of the compensation committees at the largest organizations have a written charter statement compared with 80 percent of the compensation committees at smaller organizations.
  • At 60 percent of the largest organizations, both the board and compensation committee review Form 990 before it is filed. Only 42 percent of smaller organizations do this.
  • Ninety-seven percent of the largest organizations have a formal executive compensation philosophy document outlining target markets, pay positioning and the role of each element of pay compared with 85 percent of smaller organizations.
  • At 88 percent of the largest organizations, the compensation committee or full board approves compensation actions for both the CEO and other executives. Only 56 percent of smaller organizations do this.

For more information, visit www.mercer.com.