El Camino Hospital will not renew president and CEO Ken Graham’s contract when it expires June 30, the close of fiscal year 2010-2011. The determination, at the request of the hospital’s board of directors, cited no specific reason.
In a closed session Feb. 9, the five board members, scheduled to evaluate Graham’s performance, voted 3-2 – with Directors David Reeder and John Zoglin dissenting – not to renew his contract.
The initial announcement came at approximately 11 p.m., when the board reconvened to open session. Board Chairman Wesley Alles and Directors Uwe Kladde and Dr. Patricia Einarson voted in favor of nonrenewal.
“During Mr. Graham’s almost five-year tenure, El Camino Hospital has experienced many notable accomplishments, including the opening of a new seismically safe hospital building, redesignation as a nurse Magnet Hospital, a praiseworthy Joint Commission survey, the establishment of the Women’s Hospital and the Center for Advanced Radiosurgery,” Alles said.
With 35 years in the health-care industry, Graham was appointed El Camino CEO in mid-2006. Following a controversial 4.7 percent average salary increase for the hospital’s 12 top executives effective August 2009, Graham commanded a $632,640 annual salary with a 21.6 percent salary-based incentive compensation package. But that was when profits were plump.
Amid the hospital’s financial woes following El Camino’s new hospital opening, board directors last year froze executive salaries and declined to consider awarding incentive bonuses. And though a 140-person reduction in force was averted through voluntary terminations and retirements, the hospital’s reorganization affected 261 employees in status, shift or department responsibilities.
“As with all CEOs, it is my role to serve at the will of the board,” Graham said. “The El Camino Hospital team has had many accomplishments in the past four-and-a-half years, and I am confident that the hospital will continue to do very well.”
Under his contract, Graham is entitled to 18 months’ severance pay, a one-time $948,960 payment, as well as continued contributions for medical, dental and vision plans for the same time period.
The board has authorized Alles to form an executive search committee and initiate the process to find a new CEO. However, it may be difficult to hire a CEO with little more than four months remaining in the fiscal year. Following the abrupt retirement of Chief Financial Officer Marla Marlow last May, the hospital has not named a permanent replacement to that executive position.
“The important step will be finding a wonderful replacement for Ken,” said hospital spokeswoman Chris Ernst. “It’s all about finding the right person.”
It is unclear whether Graham would stay indefinitely beyond June 30 if the hospital has not identified a replacement.
“That’s an unanswered question,” Ernst said. “There will be ongoing discussions.”
During the transition period, Alles said Graham would have full authority and responsibility as president and CEO.