5 contract and compensation tips for CEOs

People might not like to talk about what they earn, but compensation should be open for discussion, according to speakers at this week's annual congress of the American College of Healthcare Executives (ACHE) in Chicago.

In a session yesterday on CEO compensation and career planning, the speakers stressed the importance of carefully examining employment agreements, not only to judge compensation but also for career advancement.

"Be active participants in the dialogue about compensation--not passive--particularly around the employment agreement," said James Nelson, managing principal of the Minneapolis office of Sullivan, Cotter and Associates, a compensation and benefits consultancy. Although it's ultimately a board decision, he added, healthcare executives must take part in the discussion.

Speakers also said it's important for healthcare executives to review their own contracts, even if they don't want to think about the worst-case scenario--termination. "Once you're off the team, that's all you have to rely on--what's in writing," David Olson, chief strategy officer at the Froedtert Health system in Milwaukee, said.

Some other tips compiled from the session speakers:

1. Question noncompete clauses
Olson, who joined Froedert in November, learned the lesson first-hand. He had been recruited by Columbia St. Mary's in Milwaukee and was set to succeed the system's CEO. But eight months later Olson's position as the executive vice president and president was eliminted and he was terminated.

Luckily, his contract did not include a noncompete agreement, allowing him to take the job at Froedert and avoid uprooting his family.

"At the time, I didn't know how beneficial it was not to have a noncompete," Olson said.

Olson told FierceHealthcare that executives who do have a noncomete clause in their contracts should question whether it's a fair deal. Does the noncompete clause pass the reasonableness test? Geographic boundaries and specific competitors should be spelled out before executives consider signing the dotted line.

2. Consider retirement benefits
Younger executives caught up in the excitement of a new job should be careful not to overlook retirement benefits in agreements, Gregory Lintjer, president and chief executive officer of Elkhart (Ind.) General Healthcare System, said. Determine whether the retirement benefits offer an appropriate compensation level.

3. Review compensation regularly
In addition, the ACHE speakers encouraged executives to review compensation regularly on an annual basis to reflect the organization's compensation philosophy. The trend is less formulaic than in days past and includes more quality incentives that align executives and physicians, Nelson noted.

More organizations are moving away from a strict data-only percentile compensation model, for example, in which a hospital pays in the 50th percentile just because other hospitals are doing it. These days, compensation is more and more focused on quality, Nelson said. "Data is a rearview mirror." 

4. Time reviews right
Further, Olson, added, "If you're going to ask about compensation, do it when you've had successes or take on additional responsibilities."

5. Spell it all out
Lastly, Nelson also said that the agreement should spell out line-by-line what those responsibilities are and what the quality measures will be so that all parties have a clear understanding of expectations.