Governing Health McDermott Will & Emery

It's the perfect time of year to take stock of the leading developments of the prior 12 months and consider what lessons they have to offer us. This valuable exercise for corporate directors can put them in a better position from which to address the looming agenda items their boards face in 2023. For directors of healthcare companies, governance trends range from the economy to the corporate social voice, ESG to mission-critical corporate risks with many stops in between. To lead this review, Michael Peregrine sits down with Charles Elson, Founding Director, Weinberg Center for Corporate Governance, Retired, Willard Shared, Corporate Governance, University of Delaware, and Executive Editor at Large, Directors & Boards. Charles offers a comprehensive review of the leading governance issues of 2022, as well as a look at what may be to come in 2023.

How, if at all, do ESG principles affect the healthcare sector in general and the not-for-profit sector in particular? 2022 has demonstrated how ESG is being incorporated into healthcare, and it is critical that the entire organizational leadership team, not just the CFO, finance team or other senior executive leaders, as well as the board, understand the scope of this new approach. To gain a greater understanding of the vast implications of Moody’s new ESG scoring system, Michael Peregrine is joined by Moody's Vice President and Senior Credit Officer Daniel Steingart, and Eva Bogaty, Associate Managing Director, Non-for-profit Healthcare Group at Moody’s. Together they discuss the significant business case underscoring the importance of a focus on ESG scores in the healthcare industry, including:
- An overview of Moody’s ESG scoring and history.
- The message behind a low ESG score.
- The correlation between ESG score and the general credit rating process.
- Overall governance considerations of a healthcare organization.
- ESG scoring focuses on measuring risk, not social good.
- Five sub-factors that are considered in scoring for environmental and social issues.
- Extreme highs and lows in governance scoring.
- Key notable trends in preliminary scoring.

In this, the second part of an insightful conversation about the challenges and trends facing the executive compensation committee, Michael Peregrine, Tim Cotter, and Ralph DeJong address (i) considerations for special compensation arrangements, (ii) the role of discretion in business judgment and goal-setting for the coming year, and (iii) how the committee can best prepare for and respond to media questions about CEO compensation in advance—as well as a host of additional challenges facing the committee, including:
- Performance measures for ESG themes.
- Should organizational structural considerations be a committee concern?
- Revisiting the committee charter to ensure continued relevance.
- Key takeaways from recent committee meetings.

The board’s executive compensation committee is the focus point for many of the extraordinary financial, economic and operating challenges currently facing healthcare organizations. Executive compensation increases are impacted by both an inflationary economy and significant revenue downturn. In addition, the Department of Justice has identified executive compensation as an important conduit through by which corporate compliance incentives and deterrence can be implemented. Furthermore, executive recruitment and retention amidst the “Great Resignation” remains a key compensation concern.

These and similar issues have become important agenda items for the board’s executive compensation Committee. Michael Peregrine is joined by industry experts Tim Cotter and Ralph DeJong for the first in a two-part conversation about the impact of the developments on the compensation committee, including:
Key topics for briefing the board’s compensation committee.
Increasing communication between the compensation committee and the C-Suite.
- Addressing pressures felt by executive committee members.
- Insights from the Sullivan Cotter compensation data survey.
- Projections for the impact of inflation on next year’s salary increases.
- Expectations for future CEO salary increases and organization departures.
- The segmenting approach to leadership plans.
- Coordination with the Audit & Compliance Committee on compensation incentives.