Non-Profit Hospital Governance, Conduct, and CEO Pay

Daniel Kessler and William Wygal

No 33278, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We investigate whether two characteristics of non-profit hospital boards – the number of board members and whether the CEO is a board member – are associated with CEO pay and several measures of hospital performance, including price, operating margin, quality, and service to low-income patients. Although the consequences of CEO board membership for for-profit firms have been studied extensively, the consequences for non-profits in general, and non-profit hospitals in particular, have received little attention. Because most hospitals are non-profit and non-profit hospital prices have increased rapidly over the past 20 years, this gap is important. We find a strong positive association between CEO board membership and non-profit hospital prices, operating margins, and CEO pay, with a weaker positive (negative) association between CEO board membership and quality (service to low-income patients). We conclude that CEO board membership contributes to the fundamental agency problem between non-profit hospitals’ management and the hospitals’ intended beneficiaries, consistent with the concerns expressed by Fama and Jensen (1983).

JEL-codes: G39 I11 L31 (search for similar items in EconPapers)
Date: 2024-12
New Economics Papers: this item is included in nep-cfn and nep-hea
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