ABSTRACT
Although hospitals vary in terms of their governance structures, little research has focused on the effectiveness of these governance mechanisms through the study of executive contracting. Using a sample of 80 non-for-profit private hospitals in the Netherlands, I investigate whether differences in governance structures of hospitals are informative for explaining the variations in chief executive pay. After controlling for important economic determinants of CEO compensation in hospitals (i.e., type and size of the hospital, CEO type and job complexity, market conditions and performance attributes), the results suggest that CEOs on average earn more (1) when the hospital's supervisory board members receive more remuneration (a higher absolute as well as an excessive remuneration) and (2) when supervisory board members have a lower level of expertise. The findings suggest that supervisory boards are more effective in controlling agency problems (i.e., aligning CEO pay to economic conditions) when their members have more expertise, but at the same time that the monitoring function is hampered when supervisory board members receive a large (excessive) remuneration.
Subject(s)
Chief Executive Officers, Hospital/economics , Governing Board , Hospitals, Voluntary , Salaries and Fringe Benefits , Documentation , Salaries and Fringe Benefits/statistics & numerical dataABSTRACT
While many hospitals are under pressure to become more cost efficient, new costing systems such as activity-based costing (ABC) may form a solution. However, the factors that may facilitate (or inhibit) cost system changes towards ABC have not yet been disentangled in a specific hospital context. Via a survey study of hospitals, we discovered that cost system development in hospitals could largely be explained by hospital specific factors. Issues such as the support of the medical parties towards cost system use, the awareness of problems with the existing legal cost system, the type of contract for the physician's internal financial agreement, should be considered if hospitals refine their cost system. Conversely, ABC-adoption issues that were found to be crucial in other industries are less important. Apparently, installing a cost system requires a different approach in hospital settings. Especially, results suggest that hospital management should not underestimate the interest of the physician in the process of redesigning cost systems.
