determine its redistribution within HDB. These rights were a source of power, and they constituted an intangible, non-pecuniary but distributable surplus that combined a sense of satisfaction with pride at having made positive changes to the public hospital the ALSM members adopted. When this non-pecuniary surplus dried up as the informality of the experience became more of a liability than an opportunity, the ALSM resigned.<sup>40</sup> The HDB experience points to the necessity of ensuring that a surplus of some (non-pecuniary) form accrue to board members. Politicization and power imbalances can seek to reduce the influence of board members and quell initiative, just as excessive bureaucratization and controls can.

Still more interesting, and more delicate, was the pairing of control and claimant rights for the director -- a result that is not easy to replicate in the public sector without risking abuse. HDB achieved this by allowing the director's income supplement (bonus) to increase as the hospital's cash flow augmented. Interestingly, this scheme was closer to a re-distributable surplus than to an incentive plan because it was never contracted for. Not surprisingly, some of the more successful cases of hospital corporatization entail incentive compensation schemes for directors and staff. For example, in some hospitals in Catalunia a proportion of the director's salary is linked to hospital profits (Via, 1999).

While the use of incentive pay permeated the entire HDB experiment, it was more successful in some areas than in others. Among the rights considered, but not fully adopted, was the use of incentive pay as a fine disciplinary measure. According to interview data I collected, the intention was to grant bonuses only when they were deserved. For example, an attempt was made by the ALSM to implement a system of monitoring physician hours spent at the hospital, and minutes of meetings mention consideration of purchasing a device for this purpose (Minutes, 15.V.95). However, the hospital director, a physician himself, did not allow the ALSM to exercise this decision right. During interviews, he explained that he resisted this change because he felt it was impossible and unreasonable to try to monitor physicians in this way. Regardless of whether this particular measure was reasonable or not, the director's inability to take strong disciplinary measures at HDB was characteristic of a range of difficulties encountered in superimposing an autonomous institutional design onto a centralized design. There were limits to the range of complementarities that could be created informally because of the systemic, capacity and process constraints discussed in Section 2.

By 1996, HDB staff had come to see the income supplement policy as a right, and it was no longer producing the productivity effects that helped transform HDB in the early 1990s. In addition, the decline in HDB's revenue weakened the power of incentive schemes the ALSM was able to offer through salaries. It also weakened the _raison d 'etre_ of the ALSM, and further reduced its leverage over the director. However, while HDB attempted incentive

> 40 Indeed what is remarkable about this experience and the limited experience with corporatization in Lebanon to date is that there is no dearth of people interested in improving the operations of the public sector, given the right conditions and incentives. If well designed, corporatization of hospitals has enonnous potential in Lebanon, especially given entrepreneurial skills present.

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