The Office of Massachusetts Attorney General Martha Coakley has issued a report examining executive pay at 25 of the largest nonprofit organizations in the state, 12 of which are hospitals or health systems.
The AG's report is based on organizations' "Schedule EC" for their CEOs for calendar years 2009, 2010 and 2011. The schedule asks for information on the same general categories as the IRS' Schedule J — base compensation, bonus and incentive compensation, retirement and other deferred compensation and nontaxable benefits — but the EC requests narrative explanations about figures that are not self-explanatory.
Of the healthcare providers in the report, Boston-based Partners HealthCare System had some of the highest numbers, paying its CEOs between $2.1 million and $3.1 million the years examined. James Mongan stepped down as CEO in 2009, and Gary Gottlieb, MD, took on the title in 2010.
On the other end of the spectrum are Lawrence General Hospital and Beth Israel Deaconess Medical Center, which paid their CEOs less than $1 million each year. The exception is Lawrence General in 2009, which paid CEO Joseph McManus more roughly $3 million, but that included deferred compensation paid at the time of retirement after 30 years with the hospital.
The report also included four Massachusetts health insurers — Blue Cross Blue Shield, Fallon Community Health Plan, Tufts Associated HMO and Harvard Pilgrim Health Care. BCBS topped the others with its executive pay to CEO Cleve Killingsworth in 2009 ($2.5 million) and 2010 ($8.8 million), the year he left the company. That latter figure included a severance package and payout of accrued vacation time.
The report's authors found market rates of pay for similarly situated executives to be one of the main factors organizations used to determine the reasonableness of pay for their CEOs. The AG office does not approve of such exclusive focus on these market rates. "Additional factors should be included in the analysis of 'reasonableness' to broaden the context for the determination," they wrote.
The AG office is not recommending specific limits on executive pay, but the report authors did recommend that nonprofits consider the level of public support they receive as an aspect of determining the reasonableness of executive pay. "Unnecessarily large or excessive compensation packages can have a negative impact on a charity's core mission and can cause significant reputational harm," according to the report.
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