How Do You Define “Excessive Compensation?”

Posted on May 1, 2009


An article by Sarah Jane Tribble in last Saturday’s Cleveland Plain Dealer should serve as a reminder that controversy over executive compensation – and what defines “excessive” compensation – is not limited to Wall Street, nor to the private sector in general. The article looks at the pay of executives at nonprofit hospitals and discusses some of the challenges being faced by hospitals as they navigate between the need to attract and retain talent on one hand, and public opinion (as well as the IRS) on the other.

According to the article:

An Internal Revenue Service official warned all nonprofits this month that scrutiny of their pay practices was likely to increase. And Sen. Charles Grassley of Iowa, the ranking Republican on the Senate Finance Committee, who for years has pushed for greater transparency in nonprofit reporting, signaled last month that he was still not happy with how much nonprofit hospitals paid executives. He did not single out a specific hospital.

The debate on what constitutes “fair” compensation is still in its early days. And as the relationship between the government and the private sector continues to evolve in new and interesting ways, the issue is bound to be front and center for some time to come.

Posted in: Compensation