Friday, March 11, 2011

Two More MA Nonprofit Health Insurers Rethink Their Board Pay

Excessive Executive Compensation has been an issue for the public ever since the bank bailouts.  It's all too common to hear about big Wall Street firms, that have received government bailout funds paying their executives an absurd amount of money.  However, now it's nonprofits that have the excessive compensation spotlght on them.

After Blue Cross Blue Shield of Massachusetts suspended the pay of their board members after intense public criticism (as well as an outcry over the $11 million severence package given to their ex-CEO), more nonprofits are reconsidering the way they handle executive and board pays.  According to the Boston Globe, two more nonprofit health insurers in Massachusetts are going to consider suspending their board pay after MA Attorney General Martha Coakley said other insurers should follow Blue Cross's lead.  The insurers, Harvard Pilgrim Heath Care and Tufts Health Plan, announced ther plans on Thursday.

Paying nonprofit board members, while not illegal, is considered extremely unethical.  In the Boston Globe article F. Warren McFarlan,a professor at Harvard Business School, harshly criticized this act:

“On for-profit boards, you expect to be paid. In the nonprofit world, it’s about time, talent, and treasure. It’s about serving the organization’s mission."
It is unclear at this point whether these two organizations, along with the rest of the nonprofits that pay their boards, will decide to actually suspend board pay and reduce excessive executive compensation.  One would think they almost have no choice if they want to avoid the wrath of an angry public.

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