Monday, September 28, 2009

Hold That Crime Wave!

This morning's issue of the Chronicle of Philanthropy reports that "Nearly 30% of Nonprofit Leaders Took a Pay Cut This Year; Pay in 2008 Grew Quickly." NPR's Morning Edition picked up the story and played it this way: "It's one of those things that irks charitable givers no end - the high salaries paid to some nonprofit CEOs." The reportage went on to say that "the top pay at the nation's largest nonprofits rose again last year. ... But the survey also found signs that these high dollar salaries may be starting to turn around."

Ken Berger who heads rating agency Charity Navigator said that many donors go to the site, find out what a CEO's salary is "and vow never to support them again." He says this is the number one comment he gets.

Clearly there are horrendous salary abuses that make hot stories hotter and then there's the Chronicle's ridiculous and unsupported assertion that "The increases that nonprofit leaders received in 2008 are especially noteworthy considering the sharp drop in pay earned by for-profit executives." Huh? Why noteworthy? Among the 325 large charities surveyed nearly 100 leaders took a cut; half got raises; half pocketed smaller increases or saw their salaries drop.

In any organization setting the CEO's salary is a work of art. For me the test should be less about the CEO's salary (and perks) standing alone and more about his/her compensation in relation to the organization's total budget and the total responsibility assigned. Looked at that way I can make a pretty good case that even the highest paid CEOs in the kingdom of nonprofits are grossly underpaid! Take NYU - one of the institution's named. President John Sexton earned $1.3 million in 2008. Leaving aside the brilliance and verve he has brought to the job (non-quantifiable of course) the university's 2008 revenue budget was over $2 billion and it had assets on the balance sheet of nearly $6 billion. Even if you add in the perks like housing, car(s), entertainment allowance(s) etc. and goose his pay up to say $1.8-2.0 million I don't think he's near to being overpaid.

If you look at who's on his board of trustees there aren't many who don't have even sunnier paydays than Sexton for jobs of comparable scope and responsibility - plus the stock options (in some cases) that are of course not available in nonprofits. I'm sure Sexton will appreciate my plumping for a pay increase. But that's not my point. My sniff test is reasonableness. He passes.

At MOMA and at the Metropolitan Opera the Chronicle reports that directors Glenn D. Lowry and Peter Gelb respectively took pay cuts from their $2.1 million and $1 million+ salaries. Each man has brought innovation and excitement to his job - assets that don't show on the balance sheet of either institution. MOMA's assets exceed $1.6 billion and their revenues are about $150 million. The Met's assets (a few years ago - the latest available) were about half a billion and revenues about $140 million. These are huge numbers for arts organizations and few around the country come anywhere close. But I think given the responsibilities involved these guys are not overpaid. I believe their compensation is reasonable.

If you climb down the charity ladder you could apply the same is-it-reasonable test to any organization. I think you'd find most would pass, a few egregious abuses would be found, but for the most part, the men and women who run these organizations are - in my experience - less well compensated than their counterparts in the other world.

Years ago I was a stringer for the two dailies in Paterson NJ. Because I had a day job I spent more time at the morning paper because it went to bed late the evening before. One slow news night I was hanging about hoping to be asked to do something, anything. An older reporter told me to go over to police HQ and copy out the evening's entries from the booking blotter. There was a story the next day - under his byline - "Crime Wave Hits Paterson." Wow.

1 comment:

John W. Hicks, CFRE said...

Hank, great piece and thanks for posting!

Alas, I think we will continue to see articles like this as long as the popular perception of public sector work is equated with a necessity to take a vow of poverty. As well know, some of the most brilliant insitutional leaders are not found in the halls of corporations like GM, but rather in the halls of not-for-profits like GMHC. I concur with your the metrics on executive pay.