Download this Paper Open PDF in Browser

Fiduciary Duties of Interlocking Directors within a Nonprofit Health System

31 Pages Posted: 11 Sep 2008  

Nathan Hershey

University of Pittsburgh - Department of Health Policy and Management

Christine M. Jarzab

Warren General Hospital

Date Written: 2005

Abstract

In response to regulatory and financial pressures, entities participating in the healthcare industry have joined with others in order to maintain, even improve, their market positions. In the nonprofit sector of the industry, partnerships, mergers, and acquisitions have included arrangements whereby some corporate partners have interlocking directors. After review of the fiduciary duties of care and loyalty owed by corporate board members, and their application to traditional performance and conflict of interest situations, the authors address two scenarios raising interlocking director issues.

One scenario involves the acquisition of a community hospital by a health system; the other a "partnership" between a health system and a university with a medical school. Their analysis leads to the conclusion that the duality of interest created by interlocking directors should not ordinarily bar participation in corporate decisionmaking by such directors, because the key reason for establishing such interlocking directors is to create a mechanism for the entities, through their representatives, to participate the decisions of each other.

Keywords: interlocking directors, fiduciary duties, conflicts of interest, nonprofit, healthcare, corporation, board

Suggested Citation

Hershey, Nathan and Jarzab, Christine M., Fiduciary Duties of Interlocking Directors within a Nonprofit Health System (2005). Journal of Health Law, Vol. 38, No. 3, 2005; U. of Pittsburgh Legal Studies Research Paper. Available at SSRN: https://ssrn.com/abstract=1264052

Nathan Hershey (Contact Author)

University of Pittsburgh - Department of Health Policy and Management ( email )

United States
412-624-3609 (Phone)

Christine M. Jarzab

Warren General Hospital ( email )

2 Crescent Park West
Warren, PA 16362
United States
814-723-4973 x1508 (Phone)

Paper statistics

Downloads
174
Rank
144,877
Abstract Views
1,066