The province says Bethania Group Personal Care Homes broke the law when it allowed its top executive to retire and then rehired him at higher pay.
The board says in a statement it would rather sit down with the government to resolve questions about Ray Koop's employment.
The board continues to say it has a moral and legal obligation to honour the CEO's contract.
The board is also eliciting public and donor support if the government pursues what it calls a politicized or punitive approach.
The issue was uncovered by an audit the government ordered last year after financial irregularities at another personal care home.
Health Minister Theresa Oswald said last month that Bethania broke a provincial law that governs publicly funded health bodies. She ordered the company to terminate Koop's contract.
The board of directors responded by saying the contract was approved before the law took effect. It also said the change saved taxpayers $16,000 a year in pension contributions and leave allowance.
Bethania Group runs two Mennonite-based care homes in Winnipeg.
(CJOB, The Canadian Press)