Executive compensation for the health care industry is always an important topic for the board, made even more critical by the provisions of the Tax Cuts and Jobs Act and recent governance trends. We’re joined by two of the leading health care industry voices on executive compensation practices: Tim Cotter of Sullivan, Cotter and Associates, and McDermott partner Ralph DeJong.
How the Tax Act Upsets the Board/Executive Compensation Committee Dynamic
Michael Peregrine and Ralph DeJong wrote this bylined article about what they called the “enormous consequences” for tax-exempt hospital senior executive compensation due to the new Tax Cuts and Jobs Act provisions that place an excise tax on executive compensation and benefits. “From a corporate governance perspective, the significance of these new provisions carries the potential for recalibrating the relationship between the board and its executive compensation committee,” the authors wrote.
Originally published in Bloomberg BNA’s Health Law Reporter, January 2018.
Tax Reform Bill Becomes Law: Lessons for Tax-Exempt Organizations
Tax-exempt organizations—especially hospitals and health systems—face a new tax reality now that both houses of Congress have voted to pass the final tax reform bill.
Advising the ‘Cultural Revolution’ in the Boardroom
Michael Peregrine wrote this bylined article analyzing what he called the “significant emerging governance trend” in which corporate boards proactively exercise “more vigorous and direct oversight of the organization’s corporate culture,” reflecting “an increasing awareness of how matters of culture and reputation correlate to the success of an organization, and to the board’s efforts to sustain long-term corporate objectives.”
Clawbacks, Compliance and Incentive Compensation: A Supplemental Approach
The following post comes to us from Michael W. Peregrine, Partner at McDermott Will & Emery, Andrew C. Liazos, head of McDermott’s executive compensation practice, and Timothy J. Cotter, Managing Director at Sullivan, Cotter, and Associates, Inc.
Governing boards should consider compliance-based incentive compensation as a supplement to statutorily mandated “clawback” provisions, and as an alternative to more aggressive proposals to recoup past compensation from “culpable” executives. The general counsel is well situated to support the board in any evaluation of compensation-based executive accountability policies.
There is much public discourse concerning the function of clawback clauses, their structure, and their limitations. Much of this discourse is prompted by recent corporate scandals and associated calls for executive accountability.[1] But there are other reasons. There is extensive discussion in anticipation of rulemaking from the Securities and Exchange Commission that is required under Dodd Frank Section 954.[2] Notable governance commentators and shareholder advocates are encouraging boards to adopt clawback policies that go beyond the statutory requirements.[3] Major public companies are adopting their own versions of clawback policies,[4] including some who are doing so at the behest of investors.[5] In addition, the boards of large, financially sophisticated nonprofit corporations are considering clawback policies as a demonstration of corporate responsibility.[6] Indeed, how best to establish a “clawback” policy continues to be a hot topic!