Executive compensation in the multiaffiliate corporation

Abstract

Designing compensation programs for the growing number of multiaffiliate health care corporations is a complex task. Compensation structures should be based on responsibility, not organization affiliation, to avoid the perception that corporate-level positions are always worth more than affiliate-level ones. To accomplish this, administrators must identify characteristics shared by key corporate and affiliate positions, including having direct responsibility for implementing board policies and taking actions that directly affect the organization's viability. Position titles and salary structure should reflect similar responsibility levels. When analyzing salary surveys, administrators must determine affiliates' autonomy within the corporation; institutions with direct corporate supervision may have lower compensation levels than free-standing ones. Corporate executive compensation may emphasize fringe benefits rather than base salary; differentials here should also reflect position responsibility. Incentive awards, a growing factor in executive compensation, should be based on predetermined, quantifiable objectives. Awards may vary because corporate, affiliate, and proprietary executives have different goals. The responsibility for the organization's compensation program belongs to the corporate board. It can best discharge this responsibility through an executive compensation committee. The committee's duties include evaluating the CEO, establishing a compensation philosophy, ensuring consistency in program application, and integrating compensation with long-range plans. Committee members must be objective, recognize the organization's need for executive talent, have corporate experience, and view executive compensation in "global" rather than local terms.