Across many fronts, but particularly in executive compensation, nonprofit healthcare can be expected to feel the impact of a changing perspective on corporate social responsibility and sustainability (CSR). A good discussion of this was developed by the Society for Human Resource Management’s Future Insights, Top Trends by Special Expertise Panel in its release for 2010. External pressures have been documented in the media and regulation, but the Panel believes that internal pressure to embrace CSR will increase as an increasing number of Generation Y employees weigh an organization’s CSR commitment as a factor in accepting employment and remaining employed in an organization.

Trends across for-profit and across healthcare, higher ed and other nonprofit sectors seem to be mirroring each other. For example, when Lawrence Associates was quoted in the BNA Daily Tax Report, IRS Audits Harvard, Other Universities in Probe of Exempt Purpose Rules by Diane Freda, March 26, 2010, the former IRS Exempt Organizations Director Marcus Owens, now an attorney with Caplin & Drysdale, said that a review of compensation has now become a staple of every audit of an exempt organization.

Most recently, Dodd-Frank, legislation enacted July 21, 2010, in response to market excesses and regulatory inadequacy, is expected to have a spillover effect on nonprofits much like the spillover effects of Sarbanes-Oxley. This is described in an interesting article by Michael W. Peregrine, McDermott Will & Emery, LLP and Timothy J. Cotter, Sullivan, Cotter and Associates, Inc.: Dodd-Frank: The Spillover Impact on Nonprofit Healthcare. These legislative initiatives, enhancing board independence, reducing potential conflicts of interest, increasing “say-on-pay,” requiring disclosure of the ratios of CEO to median employee total compensation and CEO to executive pay, along with clawback provisions on incentive pay; attention to conflicted advisors; and documentation of pay for performance all reflect a sea change in governance of both for-profit and nonprofit organizations.