The pit­falls of blend­ing pub­lic and pri­vate

The Hamilton Spectator - - OPINION - Graham Rockingham

St. Joseph’s Health Sys­tem CEO Kevin Smith’s re­cent ex­pe­ri­ence on the board of Home Cap­i­tal Group demon­strates the mine­field that awaits se­nior pub­lic ser­vants who choose to moon­light in the pri­vate sec­tor.

Smith re­signed Mon­day as chair of the board of di­rec­tors of Home Cap­i­tal Group (HCG) af­ter a stormy month that saw the sub­prime mort­gage com­pany ac­cused of mis­lead­ing in­vestors by the On­tario Se­cu­ri­ties Com­mis­sion, re­sult­ing in a tum­ble of the com­pany’s stock value. (Smith is not one of the ex­ec­u­tives im­pli­cated in the OSC in­ves­ti­ga­tion).

In a state­ment to The Cana­dian Press, Smith said he worked hard bal­anc­ing his du­ties at Home Cap­i­tal with his du­ties run­ning one of the largest hos­pi­tal net­works in the coun­try.

“How­ever, given the changes at Home, the chair will be re­quired to ded­i­cate ad­di­tional time and at­ten­tion. As such, I’ve asked the board to per­mit me to step out of the chair and they have gen­er­ously ac­cepted,” said Smith, who will re­main as a di­rec­tor of the board.

It’s hard to imag­ine that he would have taken on the chair of Canada’s largest al­ter­na­tive mort­gage com­pany — a job for which he was paid $357,500 in de­ferred share units last year — with­out be­ing aware it would some­times re­quire “ad­di­tional time and at­ten­tion.”

Two weeks ago Smith also re­signed as a mem­ber of the $70 bil­lion Health­care of On­tario Pen­sion Plan (HOOPP), af­ter it granted Home Cap­i­tal a $2 bil­lion high-in­ter­est bailout. Both HOOPP and Home Cap­i­tal have said Smith wasn’t in­volved in de­ci­sions to give or re­ceive the cash.

Con­sid­er­ing Smith is be­ing paid more than $725,000 a year to run both St. Joseph’s Health Sys­tem and Ni­a­gara Health Sys­tem, it was only nat­u­ral that his role at Home Cap­i­tal would draw ques­tions at Queen’s Park.

Con­ser­va­tive fi­nance critic Vic Fedeli raised the mat­ter sev­eral times last week in the leg­is­la­ture, openly won­der­ing where Smith could find the time to chair the board of a floun­der­ing mort­gage com­pany.

Smith is among the most high-pro­file hos­pi­tal CEOs in On­tario with a stel­lar rep­u­ta­tion. Un­der his lead­er­ship St. Joseph’s has been a leader in health care and in­no­va­tion. His lead­er­ship has been ex­em­plary.

He also chairs the board of the Canada Foun­da­tion for In­no­va­tion and the Car­diac Care Net­work of On­tario, as well as be­ing a mem­ber of three Min­istry of Health ad­vi­sory groups. These all make sense for a re­spected hos­pi­tal ex­ec­u­tive. But not board chair of a sub­prime mort­gage lender. The blend­ing of pub­lic and pri­vate sec­tor roles presents all sorts of po­ten­tial pit­falls and con­flicts. The op­tics can be ugly, es­pe­cially when cir­cum­stances re­quire “ad­di­tional time and at­ten­tion.”

Smith must seek ap­proval from the board of St. Joseph’s in or­der to sit on out­side boards. Maybe it’s time to dis­cuss hos­pi­tals and other pub­lic in­sti­tu­tions putting rea­son­able lim­its on which out­side boards their ex­ec­u­tives can or can­not sit.

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