Review of the corporate and healthcare governance literature
Lynne Bennington
Professor, Faculty of Business, Australian Catholic University, Australia
PP: 314 - 333
Abstract
The governance and effectiveness of the healthcare sector is paramount due to its impact on human well-being and the size of this sector of the economy. Astute governments and healthcare boards need to know how to improve the governance of the sector. Therefore, this review draws together the theoretical and empirical literature from both the corporate and healthcare governance literature to determine the state of knowledge that can confidently guide those who either perform board roles as directors or who create governance structures. It concludes by suggesting that that further theoretical work and research are necessary, and that the focus of both needs to be broader to take into account the complexity of the sector.
Keywords
Corporate governance, healthcare governance, CEO duality, firm performance, board evaluation, board process
Article Text
The importance of the governance role in healthcare cannot be under-estimated due to the impact of the healthcare system on human well-being, the size of this sector in the current economy (Pointer & Stillman 2004), and the increase - to 30% of GDP - expected in OECD countries by 2030 (Boscheck 2006). Yet attention to the governance in this sector, especially in the government owned and non-profit components, has not been commensurate with the enormity of the challenges faced. Rising costs, developments in science, technological change, political and economic change, and escalating service expectations together with increasing demands for greater patient safety (Kulmann, Allsop & Saks 2009), efficiency and effectiveness from hospitals and healthcare providers (Barnett, Perkins & Powell 2001), simultaneously with complex ethical issues and calls for sustainable hospitals and sustainable healthcare and waste management practices, have been added to the burden for healthcare boards (Hall 2008; Hamilton 2008; Townend & Vallini 2008). Moreover, inquiries into medical errors across the health systems of many countries (see Auditor-General Victoria 2008; Bevan 2010; Braithwaite & Travaglia 2008; Callaly, Arya & Minas 2005; Cowan 2007) have raised both clinical governance[1] and medical staff governance as yet further factors in modern hospital governance (see Petasnick 2007; Scholten & van der Grinten 2002). The complexity does not end there as healthcare facilities are often owned by government, and boards are appointed by (and often constrained by) government. In many countries there is generally an expectation that healthcare services will be non-profit, progressive and community responsive, under the shadow of influential bureaucrats who sometimes have defacto control of boards and management (Li & Harrison 2008). The stakeholders are wide ranging and boards are often faced with competing and both unclear business objectives and funding.
The pressures to improve health outcomes, as well as the widely publicized failures in corporate governance over a number of years, have led administrators, policy makers and researchers to try to determine what constitutes good governance and how it can be implemented in hospitals and healthcare systems (Eeckloo, van Herck, van Hulle & Vleugels 2004). Therefore, this article reviews the extant literature on both corporate and healthcare governance. As expected, there is a disproportionate volume of literature on general 'corporate' governance compared to 'healthcare corporate' governance so the emphasis here is necessarily on corporate governance acknowledging that the applicability, in some cases, may be will be limited for government owned and/or not for profit boards, and applicable primarily to western systems. The information should be useful to those who create governance structures, and those who are either on boards or provide support to boards.
Initially, the theory that has driven much of the research and regulation will be outlined before attention will be turned to the role, structure and composition of boards and correlates of performance; board processes and relationships; and board evaluation. The paper will conclude with a general discussion that summarises the state of knowledge and identifies both simple and more complex research that might add to the knowledge base.
[1] Clinical governance relates to continuous quality improvement and is the policy instrument for modernizing healthcare (Som 2004: 89).
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