ACR NEWSLETTER

First, consider that the definition of a public charity in Massachusetts is very broad – indeed it draws in private foundations as well as health insurers. Second, consider that Massachusetts is leaving no stone unturned in trying to tamp down health care costs.  Combine that with a nonprofit health insurance company in Massachusetts where the Board of Directors is being paid as much as $90,000 a year and an ousted nonprofit health insurance executive is receiving $11 million in severance, and you’ve got a recipe for policy trouble.

In response to the fact pattern outlined above, Martha Coakley, the Attorney General of Massachusetts proposed banning pay for sitting on nonprofit boards – not just nonprofit hospital boards but all public charities in Massachusetts, including private foundations. Said Coakley, “The issue goes to the root of what a not-for-profit is…the board’s loyalty is to the mission of the organization.  Getting paid creates a conflict of interest.” 

But there’s more: in the State House, Senator Mark Montigny, a New Bedford Democrat, proposed an amendment to the state budget last week which not only banned director pay but went one step further. His amendment also capped nonprofit executive compensation – defined as salary, bonus payments, deferred compensation, and severance payments, below market rate loans and the lease or rental of any vehicle – at $500,000. The prohibition on board compensation passed.  The Senator’s strict cap on executive pay was challenged, resulting in revised language that permits the AG to review executive compensation at any public charity. If the AG does a review, she must report her findings to the legislature and may make recommendations on excessive compensation.  While not as onerous as the original proposal, this certainly leaves the door open for further efforts to cap executive compensation.