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July 11, 2014

Should you pay your hospital board?

Daily Briefing

An increasing number of hospitals and health systems are compensating their board members, but experts say the practice is not a "one-size-fits-all model," Akanksha Jayanthi writes in Becker's Hospital Review.

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According to a biennial survey from the Governance Institute, 15.5% of organizations compensated their board members in 2013, up from 10.2% in 2009. (Most boards already recompense members for costs associated with travel and conferences.)

Jayanthi notes several reasons for the trend, including using monetary incentives to attract top talent. Jim Gauss, chair of board services at executive search firm Witt/Kieffer, says, "Boards that we're working with are becoming more diligent about the specific skill sets they're seeking on their boards" and are "slowly coming to the conclusion that to compete for these kinds of people, they need to address the compensation issue."

Gauss notes that because such talent might already be committed to other boards or projects, and usually are gainfully employed, organizations are looking for ways to lure top-performing individuals and that compensation is one such route.

That may be especially true for executives who are asked to serve on the board of medium- to large-sized regional and national health systems, which often requires more of a time commitment and extra preparation for board meetings, such as reviewing financial documents. As a result, writes Jayanthi, such organizations are more likely to compensate their board members.

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On the other hand, smaller hospitals may not be able to afford to compensate their board members, writes Jayanthi. And Mark Madden, senior vice president of executive search at B. E. Smith, says community hospital boards are less likely to use monetary incentives to lure board members because they don't need them: local businesses often have a "vested interest" in working with local hospitals to build professional connections.

Jayanthi acknowledges several arguments against compensating board members: It could create a "symbiotic relationship instead of one of commensalism," and could spark the public to question paid board members' motives.

However, Ron Seifert, VP and executive compensation expert with Hay Group, says while compensating board members "is likely to raise an eyebrow in any community," it should not be the deciding factor for an organization. Instead, he says organizations should ask themselves how they can best connect with potential board members, "get their attention, and have them vested in the success of the organization," adding, "[y]ou may be talking about money. You may be talking about other modes of connectivity. It could be anything" (Jayanthi, Becker's Hospital Review, 7/8).

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