Monday, October 05, 2009

A Board of Trustees, or a Social Club for the Superclass?

We just posted about the unlikely appointment of one Mr Robert K Steel as a trustee of the Hospital for Special Surgery in New York. Mr Steel appears to have no particular expertise or experience in health care, and no special affinity for its values. On the other hand, Mr Steel was briefly the CEO of Wachovia who presided over that company's demise, despite his avowed goal of keeping it independent. Previously, he served as an Under Secretary of the Treasury during Secretary Henry Paulson's controversial bail-out of financial institutions. He also was Chairman of the Board of Trustees of Duke University during the time of the lacrosse scandal, and pledged his full support to the actions of its President (whom he had a personal role in hiring), including those that seemingly put preserving the Duke brand ahead of protecting the rights of its students.

Why would such a person be appointed to the board of a prestigious teaching hospital?

Maybe he was seen as a good fit.

The hospital board has 42 members in addition to its CEO ex-officio. Of these, 13 are physicians, and 29 are "civilians." Of the latter 29, 23 by my count have major relationships, and frequently have current or past leadership roles in financial companies, some of which were recipients of recent Treasury Department bail-outs. Thus, a majority of all board members come from finance. In addition, 7 of the 13 physician board members have financial relationships with health care corporations that might be construed as conflicts of interest. The details are below:

Non-Physician Board Members

Atiim "Tiki" Barber (sports broadcaster)
James M Benson - retired chairman of John Hancock Life Insurance; retired Chairman, President and CEO of New England Financial and of GenAmerica Financial Corporation
Peter L Briger Jr - Principal and Co-Chairman, Fortress Investment Group
Michael C Brooks - Partner, Venrock
Charles P Coleman III - Tiger Global Management
Leslie Cornfeld (deputy US Attorney)
Cynthia Foster Curry (spouse of owner of Toyota dealer)
Barrie M Damson - President and Chair, Damson Financial Resources Inc
James G Dinan - Chairman and CEO, York Capital Management
Winfield P Jones (attorney)
Monica Keany - managing director, Morgan Stanely
David H Koch - executive vice president and member, board of directors, Koch Industries (a conglomerate that provides "commodity and financial trading services" among other products and services)
Lara R Lerner - spouse of Randolph Lerner, former CEO of MBNA, which he sold to Bank of America, now has family holdings (>$1 billion in 2008) of Bank of America stock
Marylin B Levitt - spouse of Arthur Levitt Jr, former chair of the SEC, now advisor to AIG and the Carlyle Group
Alan S MacDonald - chief client officer, Citigroup
David M Madden - founder and principal of Narrow River Management (investment management company that focuses on pharmaceutical companies)
Richard L Menschel - senior director, Goldman Sachs (in 2002)
Dean R O'Hare - retired CEO of Chubb Corporation, director of DFA Capital Management
Aldo Papone - retired chairman of American Express Travel Related Services
Gordon Pattee - President, MAP Capital Corp
Charlton Reynders Jr - Chairman and CEO, Reynders Gray Co
Susan W Rose (philanthropist)
William R Salomon - honorary chairman, Citigroup
Jonathan Sobel - Global Head of Risk Management, Investment Management Division, Goldman Sachs
Robert K Steel - retired CEO, Wachovia (see above)
Daniel G Tully - founding partner and managing director, Altaris (investment company focused on "healthcare industry")
Mrs Douglas A Warner III - spouse of former chairman of JP Morgan Chase, current director of General Electric (which has both health care and finance divisions)
Kendrick R Wilson III - former executive, Goldman Sachs
Ellen M Wright (occupation not clear)

Physician Board Members

Mathias P Bostrom MD - consultant for Smith & Nephew
Richard A Brand MD -
Charles N Cornell MD - royalties from Exactech
Melvin J Glimcher MD -
Steven R Goldring MD - member, board of directors, Telik
David L Helfet MD - member of advisory boards, OHK Medical Devices Inc, Healthpoint Capital, Orthobond Corp
Carl F Nathan MD -
Stephen A Paget MD - consultant to Medarex, Crescendo Bioscience
Scott Rodeo MD
Thomas P Sculco MD - royalties from Exactech
Russell F Warren MD - chairman of the board, Highlands Acquisition Corp, chairman of the scientific advisory board, chief scientific officer, principal member of the investment committee, Ivy Capital Partners, board of directors, Orthonet, royalties from Biomet, member of scientific advisory board, Cayenne Medical, member of scientific board of advisors, HealthPoint Capital, royalties from Smith & Nephew
Torsten N Wiesel MD -
Philip D Wilson Jr MD -


As we have written previously, boards of trustees of not-for-profit health care organizations are supposed to supervise the management of these organizations, making sure it is prudent, and upholds the organizations' missions. Boards have duties to exercise reasonable care, avoid conflicts of interest, and again, uphold their organizations' missions. Thus, ideally, boards should be composed of people most likely to fulfill these duties.

In the real world, current board members usually have sole authority to appoint new board members. Thus it may be all too tempting to make fit with the current board members the main criterion for appointment of new board members. We have posted about university and hospital boards which have pluralities or majorities of members from the finance sector. Such remarkable homogeneity suggests that they picked new board members because of their similarity to current board members. (For example, see posts about the boards of Dartmouth, Harvard, and Yeshiva Universities, and of Partners Healthcare.)

Thus, the boards of prestigious not-for-profit health care organizations may come to resemble social clubs for the superclass more than collections of passionate defenders of the progress of health care.

It is hard to imagine how boards packed with finance industry executives would be the best upholders of academic and health care values, especially after the shortcomings of many finance industry leaders became so obvious in the global financial meltdown/ great recession.

If health care is to become more affordable, more accessible, of greater quality, and less demoralizing for health care professionals, health care organizations need leaders known for their devotion to putting patients first rather than their devotion to socializing with their cronies.

1 comment:

Anonymous said...

Many in this super class feel they are above the law, or the law is to be bent to serve their purpose. In the Oct. 6 Akron Beacon Journal headline Convicted elections chairman is asked to resign, we find a University of Akron trustee with two misdemeanors convictions for .... wait for it... loaning his son money to buy two homes, one of which was later bought by the university in a major student housing project.

The issue now is Jack Morrison Jr. is being asked to resign his position on the county board of elections due to ethics violations. No word yet on his seat on the UA board of trustees. Morrison is also president of the Amer Cunningham law firm.

How can we expect students, or the community at large, to exhibit ethical behavior if our academic and political leaders fall short in their commitment to serve the public. Mr. Morrison is postponing any decisions until after his appeal.

This has become the new game: Do something wrong, and if you are caught, string out the process in hopes of limiting any negative impact. All the while reaping the rewards of this bad behavior.

Leadership must be held accountable for their actions, and at the very least, removed from those positions where they have shown a total lack of fiduciary duty to the stated mission of those they serve.

Steve Lucas