Friday, October 13, 2017

Nonprofit v. Benefit Corporation v. Traditional For-Profit Hospitals

Earlier this week, my two-year old daughter was in the pediatric ICU with a virus that attacked her lungs. We spent two nights at The Monroe Carell Jr. Children's Hospital at Vanderbilt (“Vanderbilt Children’s). Thankfully, she was released Wednesday afternoon and is doing well. Unfortunately, many of the children on her floor had been in the hospital for weeks or months and were not afforded such a quick recovery. There cannot be many places more sad than the pediatric ICU.

Since returning home, I confirmed that Vanderbilt Children’s is a nonprofit organization, as I suspected. I do wonder whether the hospital would be operated the same if it were a benefit corporation or as a traditional corporation.

Some of the decisions made at the hospital seems like they would have been indefensible from a shareholder perspective, if the hospital had been for-profit. Vanderbilt Children’s has a captive market, with no serious competitors that I know of in the immediate area. Yet, the hospital doesn’t charge for parking. If they did, I don’t think it would impact anyone’s decision to choose them because, again, there aren’t really other options, and the care is the important part anyway. The food court was pretty reasonably priced, and they probably could have charged double without seriously impacting demand; the people at the hospital valued time with their children more than a few dollars. The hospital was beautifully decorated with art aimed at children – for example, with a big duck on the elevator ceiling, which my daughter absolutely loved. There were stars on the ceiling of the hospital rooms, cartoons on TVs in every room, etc. All of this presumably cost more than a drab room, and perhaps it was all donated, but assuming it actually cost more, I am not sure those things would result in any financial return on investment.

As we have discussed many times on this blog, even in the traditional for-profit setting, the business judgment rule likely protects the decisions of the board of directors, even if the promised ROI seems poor. But at what point – especially when the board knows there will be no return on the investment at all - is it waste? (Note: Question sparked by a discussion that Stefan Padfied, Josh Fershee, and I had in Knoxville after a session at the UTK business law conference this year). And, in any event, the Dodge and eBay cases may lead to some doubt in the way a case may play out. And even if the law is highly unlikely to enforce shareholder wealth maximization, the norm in traditional for-profit corporations may lead to directorial decisions that we find problematic as a society, especially in a hospital setting.

Now, maybe the Hippocratic Oath, community expectations, and various regulations make it so nonprofit and forprofit hospitals operate similarly. As a father of a patient, however, even as a free market inclined professor, I would prefer hospitals to be nonprofit and clearly focused on care first. Also, some forprofit hospitals are supposedly considering going the benefit corporation route, which may be a step in the right direction – at least they have an obligation to consider various stakeholders (even if, currently, the statutory enforcement mechanisms are extremely weak) and at least there are some reporting requirements (even if , currently, reporting compliance is miserable low in the states I have examined and the statutory language is painfully vague).

I am not sure I have ever been in a situation where I would have paid everything I had, and had no other good options for the immediate need, and yet I still did not feel taken advantage of by the organization. There is much more that could be said on these issues, but I do wonder whether organizational form was important here. And, if so, what is the solution? Require hospitals to be nonprofits (or at least benefit corporations, if those statutes were amended to add more teeth)?

October 13, 2017 in Business Associations, Corporate Governance, Corporations, CSR, Delaware, Ethics, Family, Haskell Murray, Social Enterprise | Permalink | Comments (7)

Friday, September 1, 2017

Boardrooms and Playgrounds

There has been quite a lot written about the relative lack of women on boards of directors (and their impact on boards of directors). See here, here, here, here, here, here, here, and here. Women hold slightly less than 20% of the board of director seats at major U.S. companies, depending on what group of companies you consider. See here, here, and here.

In this post, I am not going to discuss the vast literature on the topic of women in the boardroom or the quotas that some countries have established, but I do want to point out the curious lack of fathers at playgrounds in Nashville this summer. I am including this post in the Law & Wellness series because I think men and women would both benefit if we saw more fathers at playgrounds during the week.

During ten trips to our popular neighborhood playground, during weekday working hours, I saw 6 men and 72 women. Now, it is probable that some of the people I saw were nannies or grandparents, but I excluded the obvious ones and quite a large percentage seemed like parents anyway.

This is an extremely small sample, but the percentage of fathers at playgrounds with their children looks lower than the percentage of women on boards. While I haven’t counted, I have noted fairly similar ratios at the public library story-time, the trampoline park, the zoo, and the YMCA pool during weekday working hours.   

Perhaps this is not surprising, and perhaps the ratios are different in non-Southern cities (though Nashville is pretty progressive, at least for this area of the country). But I will say that I sometimes feel out of place and sometimes feel the need to explain myself when I am out solo with my children during "working hours."

When asked, I do have a “good” explanation – a fabulously flexible job – but I sometimes imagine those conversations if I had chosen to stay home while my wife worked or if I were taking time off a "normal" 8 to 5 job. Unfortunately, I don't think we are at a place, at least in my community, where we give fathers much respect for taking care of their children.  I consider raising my children an incredibly important and valuable role. Raising children is demanding and draining, but my life is undoubtedly richer for it. Over the last few years, I have also gained quite a lot of appreciation for people who raise children on their own; the job is difficult enough for my wife and me together. I am not sure what actions from government and business would be best for children, but I do know that both should be seriously considering their options. 

September 1, 2017 in Corporate Governance, Current Affairs, Family, Haskell Murray, Wellness | Permalink | Comments (1)

Friday, August 18, 2017

Law & Wellness: Introduction

On July 15 of this year, The New York Times ran an article entitled, “The Lawyer, The Addict.” The article looks at the life of Peter, a partner of a prestigious Silicon Valley law firm, before he died of a drug overdose.

You should read the entire article, but I will provide a few quotes.

  • “He had been working more than 60 hours a week for 20 years, ever since he started law school and worked his way into a partnership in the intellectual property practice of Wilson Sonsini.”
  • “Peter worked so much that he rarely cooked anymore, sustaining himself largely on fast food, snacks, coffee, ibuprofen and antacids.”
  • “Peter, one of the most successful people I have ever known, died a drug addict, felled by a systemic bacterial infection common to intravenous users.”
  • “The history on his cellphone shows the last call he ever made was for work. Peter, vomiting, unable to sit up, slipping in and out of consciousness, had managed, somehow, to dial into a conference call.”
  • “The further I probed, the more apparent it became that drug abuse among America’s lawyers is on the rise and deeply hidden.”
  • “One of the most comprehensive studies of lawyers and substance abuse was released just seven months after Peter died. That 2016 report, from the Hazelden Betty Ford Foundation and the American Bar Association, analyzed the responses of 12,825 licensed, practicing attorneys across 19 states. Over all, the results showed that about 21 percent of lawyers qualify as problem drinkers, while 28 percent struggle with mild or more serious depression and 19 percent struggle with anxiety. Only 3,419 lawyers answered questions about drug use, and that itself is telling, said Patrick Krill, the study’s lead author and also a lawyer. “It’s left to speculation what motivated 75 percent of attorneys to skip over the section on drug use as if it wasn’t there.” In Mr. Krill’s opinion, they were afraid to answer. Of the lawyers that did answer those questions, 5.6 percent used cocaine, crack and stimulants; 5.6 percent used opioids; 10.2 percent used marijuana and hash; and nearly 16 percent used sedatives.”

There is much more in the article, including claims that the problems with mindset and addiction, for many, start in law school.

After reading this article, and many like it (and living through the suicide of a partner at one of my former firms), I decided to do a series of posts on Law & Wellness. These posts will not focus on mental health or addiction problems. Rather, these posts will focus on the positive side. For example, I plan a handful of interviews with lawyers and educators who manage to do well both inside and outside of the office, finding ways to work efficiently and prioritize properly. My co-editors may chime in from time to time with related posts of their own.

August 18, 2017 in Current Affairs, Ethics, Family, Haskell Murray, Law School, Management, Wellness | Permalink | Comments (2)