Nonprofit Exec Pay Cap in the Court of Public Opinion

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January 14, 2013; Source: FierceHealthcare

Measure M, a ballot initiative in the El Camino Hospital district in California aimed at capping executive pay at the hospital at an amount that is equal to twice the salary of the state’s governor, succeeded at the polls in November. Now, the board of El Camino Hospital is suing two employees who co-sponsored the ballot initiative for engaging in what the hospital claims is an abuse of the initiative process.

One of those employees, Kary Lynch, has been fairly outspoken. Lynch told the Mountain View Voice that the Measure M concept is connected in spirit to the principles and ideals that fueled the Occupy movement, saying, “I think among the general public, people are really upset that all these executives make such extravagant salaries.”

There are six executives at El Camino Hospital whose salaries would be affected by the new law; among those six is the hospital’s CEO, Tomi Ryba. According to the Mountain View Voice, the compensation package for Ryba consisted of a base salary of $695,000 per year with a performance-based bonus of up to 30 percent. Last year, Ryba also received a $175,000 relocation fee, $147,380 to cover any loss of bonus at her previous position, and she “was eligible for a $400,000 interest-free loan to purchase a house near the hospital.” The cap would bring her total possible compensation down to $347,974. Lynch noted that Ryba’s salary, before bonuses and extras, is more than the salary of the President of the United States.

In the lawsuit, the hospital alleges that the ordinance based on the ballot initiative cannot interfere in the affairs of the El Camino Hospital District or, even if it can do that, it cannot insert itself into the affairs of the El Camino Hospital Corporation, which the hospital’s lawyers say is a separate private entity. In other statements, the hospital has declared that the cap would make it less competitive when it comes to attracting leadership.

Lynch is a union steward with the Service Employees International Union-United Healthcare Workers (SEIU-UHW). Lynch was quoted in the Contra Costa Times as saying that the ballot initiative was aimed at ensuring that local taxes are not being used to support exorbitant salaries. The hospital estimates that a local property tax provides $5 million to $9 million annually, but union representatives argued that the figure is closer to $16 million. Fierce Healthcare reported that the union had used the initiative as leverage in “tense negotiations” with the hospital over a contract but the union settled that contract dispute with El Camino Hospital in September.

The ballot initiative process in California is certainly a bit of an anomaly so that makes the story described above a little odd but it nonetheless holds some transferable truths for other nonprofit hospitals. For context, readers should examine recent newswires on the profit motive in health care (see here and here).–Ruth McCambridge