WARNER ROBINS -- The Houston Healthcare System Inc. board of trustees has made dramatic changes to its bylaws, stripping the chief executive officer position of much of its power while boosting the board’s own.
The revised bylaws prohibit the CEO from appointing, terminating and determining compensation for all officers of Houston Healthcare -- powers that the board has now given to itself. The board also eliminated term limits for its members.
Such actions are not common among nonprofit boards, according to a Washington, D.C.-based nonprofit board consulting group.
Houston Healthcare’s board of trustees unanimously approved the changes at its regularly scheduled meeting Aug. 25.
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The changes were made following nearly an hour-and-a-half in executive session, which the board closed to the public to discuss personnel matters and strategic planning.
Board Chairman Sonny Watson said during the open portion of the meeting that a small group reviewed the bylaws after the recent appointment of Mike Gray as the board’s attorney. Although Gray answered legal questions for the board in the past, the board did not officially retain him until May. As a result, Gray was not the attorney when some of the previous bylaws were written, Watson said.
Gray did not return multiple phone and e-mail messages for comment.
The group that reviewed the bylaws was made up of Gray, Watson, board members Glynn Greenway and Fred Graham, and Interim CEO Cary Martin. The bylaws first were adopted Feb. 11, 2008, and until recently they last were revised Feb. 25, 2009.
The other board members are Dr. Daniel Deighton, Larry Warnock, Jack Ragland and Ivan Allen.
The changes come at a time when Houston Healthcare is without a permanent CEO. The system board fired former CEO Grady W. “Skip” Philips without cause in May. Watson has said an active search for a CEO likely will begin about the first of year, and Martin has asked to be considered for the job.
The board of trustees for Houston Healthcare System Inc., a 501(c)(3) nonprofit corporation, is responsible for setting strategic direction for the system. Houston Healthcare employs more than 2,200 people, not counting volunteers and physicians.
Officers serve at will of trustees
The revised bylaws give the trustees more control over the executive staff while taking authority away from the CEO.
Previously, the CEO recommended to the board persons to serve as vice president, secretary and chief financial officer, all of whom then were appointed by the board. Any other officers or assistant officers were appointed by the CEO, according to the former bylaws.
Now, all vice presidents, officers and assistant officers are to be recommended to the board for appointment, the new bylaws state. And once the board appoints those officers, trustees set their compensation -- a determination the bylaws previously gave the CEO.
In addition, the CEO previously had the power to terminate any member of the executive staff, including vice presidents and other officers. Those powers now belong to the trustees.
The CEO may recommend to the board of trustees appropriate compensation or reason for dismissal, but “all officers of the Corporation serve at the will and pleasure of the Board of Trustees,” according to a new line added to the bylaws.
Watson said in a phone interview that the changes were made in the best interest of the executive team.
He said the main idea was to have the CEO recommend the dismissal of vice presidents, rather than fire outright. This was necessary, he said, to prevent wrongful termination.
For instance, if the chief financial officer found out the CEO was doing something wrong, under the previous bylaws the CEO could terminate him, and the board would have no recourse, Watson said.
“We didn’t feel that was adequate protection,” he said.
As for setting salaries, Watson said recommendations to the board already were being given in practice, even if they were not spelled out in the previous bylaws.
“We just thought the board should have more authority in setting the executive salaries,” he said.
These actions are not common among nonprofit boards, according to BoardSource, a publishing, consulting and training organization that assists in building nonprofit boards.
“It is not at all common to have others than the chief executive report directly to the board. ... Under normal circumstances it would be considered micromanagement,” Mark Doyon, vice president of marketing and membership for BoardSource, wrote in an e-mail.
“The board normally is responsible for oversight -- governance -- and it does not have the time and often expertise to get involved in the more detailed matters of the organization.”
Powers the CEO retains include: assigning officers’ duties; supervising officers’ work; supervising and directing the management and operation of the corporation; and making all decisions as to policy that may arise between meetings of the board of trustees.
The CEO is authorized to sign checks and other forms of payment in the name of Houston Healthcare, as well as grant requests, statements and reports required to be filed with state or federal officials. The CEO also may enter contracts; however, language was added to the bylaws to provide that such execution is in accordance with board-established policies.
No term limits
Under the revised bylaws, trustees now serve on the self-perpetuating board not only with more power, but also for as long as they like.
The new bylaws eliminate term limits for trustees, allowing them to serve an unlimited number of four-year terms in positions appointed by other board members.
Watson disagreed that there ever were term limits.
The previous bylaws state: “A trustee may serve for only two (2) successive terms of office.”
Watson argued that the word “may” is permissive, meaning trustees may serve for only two terms, or they may serve for more.
In any case, it is generally considered a good practice for board members to have term limits, Doyon of BoardSource wrote in his e-mail. He provided a paper on the topic.
“Rotation is a healthy and natural way of providing change and necessary transformation for a board,” according to the paper provided by BoardSource. “Bringing in new board members on a regular basis keeps away stagnation and gives the board an opportunity to renew itself.”
Advantages of term limits include the possibility to work with community members who can devote only a few years of service, easier inclusion of diversity, fresh ideas and new perspectives. Not having term limits may cause stagnation, perpetual concentration of power within a small group, intimidation of occasional new members, tiredness, boredom and a loss of commitment, according to the BoardSource document.
Term limits do come with their disadvantages as well. Term limits may cause a loss of expertise, loss of organizational memory, more time dedicated to recruitment and orientation, and additional efforts that may be needed to keep the group cohesive, according to the document.
Houston Healthcare System Inc.’s new bylaws do provide for the removal of trustees. A trustee may be removed with or without cause by a two-thirds vote of the board, not counting the subject trustee. A trustee also may be removed for failure to attend 60 percent of meetings, although the board may override that with a majority vote.
Other bylaws changes the board approved include:
— Changing the definition of a quorum to require more members to be present to constitute an official meeting. While previously a majority of the seven-member board needed to be present to constitute a quorum, it is now a majority plus one. That means five trustees must be present to have an official meeting.
“We don’t think four should be able to get together and meet. We think it should take five,” Watson said.
— Reducing the number of committees from four to two. The current committees are the Executive Committee and the Nominating Committee. The Executive Committee is to “manage the affairs of the Corporation between meetings of the Board.” The Nominating Committee is responsible for developing criteria for persons to serve as trustees and identifying and nominating candidates.
The previous committees were Executive; Governance and Board Development; Finance, Audit and Budget; and Compensation.
The Governance and Board Development Committee included the responsibilities of the new Nominating Committee as well as initiating annual board member evaluations and implementing education programs for board members.
The Finance, Audit and Budget Committee was responsible for overseeing various financial functions, and the Compensation Committee reviewed performance and compensation of executive officers.
“We felt it was in the best interest of the hospital,” Watson said regarding the changes to committees. “We don’t have to give a specific reason why we do it.”
— Eliminating the Heart of Georgia Health System Foundation Inc. from the bylaws. Watson said the group did not exist in practice, and Houston Healthcare had been paying fees to the Georgia Secretary of State for an organization that had no activity. If the foundation is needed in the future, the trustees can re-create it, he said.
To contact writer Jennifer Burk, call 256-9705.