Golden handshakes: Retiring on top and remaining on the payroll

Retired hospital CEOs often stay with the institution in a well-paid emeritus position, the New York Times reports.

That was apparently the case with Herbert Pardes, M.D., who retired as CEO of New York-Presbyterian Hospital in 2011. In 2012, he still received a pay package worth $5.6 million, which included more than $2 million in deferred compensation. And Pardes remained on as executive vice chairman of the hospital's board of trustees. That's a fairly common position at for-profit corporations but is a rarity at not-for-profit hospitals, according to the New York Times. Hospital officials told the newspaper that they retained the services of the 80-year-old Pardes because of his fundraising and lobbying prowess.

But such a practice has come under criticism. "To have a former CEO on the board is actually a big no-no," Uwe Reinhardt, a Princeton University healthcare economist, told the New York Times. "It's not considered good board manners. Inevitably they begin to meddle and micromanage."

Hospital executive pay has skyrocketed in recent years, and some studies suggest there may even be an inverse correlation to pay levels, where some in the C-suite may be paid more for poor performance.

Moreover, paying trustees of not-for-profit hospitals may cause the public to question the actual motivation as to why they sit on the board.

Like New York-Presbyterian, North Shore-Long Island Jewish Health System recently created the position of executive vice chairman and filled it with the former president of its charitable foundation. That executive, Ralph Nappi, earns a base salary of $700,000 and may also receive a bonus.

"Major nonprofit hospitals often are indistinguishable from for-profit hospitals in their operations," Sen. Charles Grassley (R-Iowa) told the newspaper. "It's not enough to say high compensation is necessary and leave it at that. A non-profit hospital should show how that compensation benefits its patients."

To learn more:
- read the New York Times article

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