The pitfalls of blending public and private
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.