Best Practices: Board Governance & Executive Compensation in Non-Profit Mental Hygiene Agencies
The report issued by the NYS Commission on Quality of Care and Advocacy for Persons with Disabilities (Commission) examines compensation practices in government funded not-for-profit mental hygiene agencies in NY State and is designed to assist boards of directors in fulfilling their duty to set reasonable compensation for their executives.
The Commission is an independent State oversight agency responsible for ensuring quality of care and cost effectiveness in the existing regulatory system, in which boards have a fiduciary responsibility to ensure that funds are spent for their intended purpose.
To prepare this report, the Commission conducted an industry-wide compensation survey of 658 agencies with a total of $9 billion in revenues and $96 million in CEO compensation; conducted site visits to selected agencies; and examined the regulatory framework in which the agencies operate. All of these activities were undertaken for identifying best practices that can be easily replicated across the State to strengthen governance by agency boards of directors.
The Commission report states it is important for boards to:
- Identify and document all forms and sources of compensation;
- Use employment contracts to specify compensation as well as duties/responsibilities;
- Select "comparables" by comparing their agency to agencies which are similarly situated and to executives in those agencies who are in functionally comparable positions;
- Ensure that the compensation is formally approved before beginning payment;
- Establish a conflict of interest policy with required disclosure; and
- Maintain records of board deliberations and decisions, including records of information relied upon, terms agreed to, and votes cast by each board member on compensation.
Regarding the executive compensation, which was self-reported in the survey responses, the Commission found:
- The median compensation package for a Chief Executive Officer (CEO) was $117,000;
- 85 percent of CEO compensation was in the form of salary;
- Of the $96 million in CEO compensation, $15 million covered benefits other than salary;
- 67 percent of CEOs had a deferred compensation and/or retirement plan;
- 42 percent had additional benefits such as life, health, and disability insurance; and
- 34 percent of the agencies provided the CEO with an automobile.