Thursday, December 27, 2007

AJC Editorial on Compensation Deal for Ex-CEO of United Way

On December 27, 2007, the Atlanta Journal Constitution (AJC) published an editorial concerning the compensation package for the former CEO of United Way of Metropolitan Atlanta. 

Revelations that its outgoing CEO departed with a seven-figure retirement supplement have flustered the United Way of Metropolitan Atlanta. On its Web site, the nonprofit has posted a long defense of the generous deal that gave former Chief Executive Mark O'Connell nearly $1.6 million in cash on top of a pension that assures him about $106,000 a year for life.

For the entire article, go to the AJC website.

DAB

The AJC editorial points up a number of recurring issues: (1)  Transparency in nonprofit governance: The organization erred, it is alleged, by only getting two board committees to approve the CEO's raises (in the form of a supplemental retirement plan), instead of the entire board -- as a half-dozen board members are now saying they didn't know about the raises. The organization disputes this, saying that the changes were unanimously approved by the whole board.  We should be able to get to the bottom of that dispute by checking the minutes: what did these half-dozen know or didn't know, and when did the know or not know it?   In any event, the board committees that approved the raises were hardly covert operations.  The committee that recommended the raise, the Executive Compensation Committee, included the current board chair, the board chair-elect, and the current campaign chair, among others. The procedural issue is just a sideshow for the real source of indignation (and envy?) by the media, and perhaps donors and the public -- the actual amount of the former CEO's compensation.  Seems like a lot, doesn't it?   (2)  Responsible use of funds: One of the former CEO's raises was counter-cyclical:  it occurred at the same time that charity was laying off two dozen workers and reducing grants by nearly 30%.  Of this infelicitous timing, a former board member says "What we didn't want to do was something that would cause [the CEO] to leave."  The CEO presumably didn't cause the economic slump, and the slump would have been an especially bad time for the organization to have to start looking for a new CEO. (3)  Public perception: Who gets more exercised at compensation for nonprofit executives: a charity's supporters; members of the broader public; or journalists and editorial writers?  The AJC editorial states that the organization's "entire mission depends on the willingness of people to sacrifice money and time to fund good works in the community. If the United Way organization and its staff are themselves seen as unwilling to sacrifice, the organization loses credibility." But the organization would also lose credibility if it's run poorly or loses its bearings during setbacks.  Would the world be a better place if charitable organizations were run by underpaid but altruistic amateurs?  Perhaps the real issue here is the need for copy by journalists who cover the nonprofit sector.  What can be done to get them to find more novel and probing issues to investigate, instead of repeatedly hauling out the old warhorse of executive compensation?

For the AJC's responses to FAQs about its former CEO's raises, see  http://www.unitedwayatlanta.org/docs/news/2007/UWMA_FAQ_121907.pdf

rak

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