The board’s executive committee may benefit from a GC-led briefing on a series of recent developments that could possibly affect the governance of large hospitals and health systems in the not-too-distant future.
First is the continuing emergence of “sustainability” as a board agenda item, for corporations across industry (and nationality) sectors. The concept of “sustainability” in the governance context refers to an expectation that boards will give consideration to environmental and social issues, and their potential to threaten both business models and financial performance. A recently released report, “Lead from the Top: Building Sustainability Competence on Corporate Boards,” addresses the concept in greater detail.
Second is an increased interest in corporate governance from governmental entities and regulators that have not historically involved themselves with boardroom matters. A leading example of this is the activity of the New York City pension funds and the New York City comptroller to improve the diversity of corporate boards. This activity includes meetings with companies to discuss their policies regarding board composition and refreshment, and to encourage those companies to consult with the NYC funds and other stakeholders with respect to possible board nominations. This initiative is part of a broader “Boardroom Accountability Project 2.0” campaign in which the NYC funds seek to be a credible agent for governance change, especially with respect to director nomination, and refreshment tools.
Third is the potential long-term impact on US corporate governance of recently proposed governance changes for UK corporations. Notable among these are mandatory reporting of the ratio of CEO compensation to the average compensation of the corporation’s workforce; and a proposed change to the national Governance Code requirement that companies adopt (or explain why they have not adopted) one of three mechanisms for enhancing the voice of the workforce in corporate governance. These reforms continue a UK emphasis on direct board engagement with its primary stakeholders. While the relevance to US companies in general (and health care systems in particular) may seem far-fetched, it is not difficult to imagine how certain interest groups (e.g., labor unions) could reference these UK reforms when advocating for change in US governance practices.
Fourth is the potential for broad cross industry implications from rulemaking proposed by the Federal Reserve that, if adopted, would change the expectations for corporate governance at bank and savings and loan holding companies. The principal focus of the change would be to enhance clarity on the supervisory expectations for boards of directors from those of senior management by detailing five specific attributes of effective boards. In addition, the proposal would also shift oversight responsibility for certain day-to-day business issues to senior management, in order to allow boards to better focus on their key oversight responsibilities. Should these proposals be ultimately enacted, the challenge will be to make sure they are understood in context (i.e., as technical responses to the governance challenges of a specific industry, as opposed to broadly applicable guidelines for corporate governance).