How much should non-profit leaders earn?
The recent controversy over the CEO's compensation at the Boys and Girls Clubs of America has re-opened a long-simmering debate about what public leaders should be paid. Outraged by CEO Roxanne Spillett's nearly $1 million package, four Republican senators have placed a hold on a $425 million Boys and Girls Clubs funding bill until the organization provides more information.
Spillett's 2008 mega-package included $361,000 in base salary, a $150,000 performance bonus, and $363,000 in deferred compensation, which the organization claimed was essential "to be fully competitive with similar national large non-profit organizations." Noting that the Boys and Girls Clubs lost more than $13 million that year, the four senators called the organization top heavy, poorly managed, and largely unresponsive to the needs of its 4,300 local clubs.
If the question is whether Roxanne Spillett makes too much money, the answer depends on which salary is under scrutiny.
On the one hand, Spillett's $361,000 base salary is well within normal compared with other large organizations in her sector. Her base would be twice as high at the Mayo Clinic and about the same at World Vision and Food for the Poor. Although endowment managers, artistic directors, and medical officers make much more, Spillett is none of the above.
On the other hand, Spillett's $1 million package seems inappropriate for an organization that serves so many poor children. It is certainly beyond the compensation envelope for the federal government's top officers. She makes almost two-and-a-half times more than the president of the United States, and almost five times more than the vice president, cabinet secretaries, the chief justice of the Supreme Court, and members of Congress. Either she makes too much or government's leaders make too little, or perhaps a bit of both.
Americans are unlikely to give Spillett the benefit of the doubt whatever her explanation. To the contrary, Spillett's package merely confirms what most Americans already believe about charities. Asked about CEO pay in 2008, almost half of Americans said the leaders of charitable organizations made too much money, while just seven percent they said they made too little.
Americans no doubt love the Boys and Girls Clubs of America, but might wonder why the CEO needs $1 million a year during the worst recession in modern history. They might also ask why so much of the package is hidden from public view in the incentive bonus and deferred compensation.
Even though Spillett is one of the most talented CEOs in the charitable sector, she would be well advised to take a voluntary pay cut. At the very least, she should return the $150,000 incentive bonus as a good will gesture. She should also return the deferred compensation. The closer she gets to her $361,000 base, the better.
Not only does her total compensation send a message of largesse both inside her organization and across the charitable sector, it is bad politics on Capitol Hill. Having spent more than $500,000 on lobbying in 2008, the organization should know what flies in Congress. A pay cut may be the only way to save the $425 million that the Boys and Girls Clubs almost had in their pocket until the four senators checked the pay stubs.
Public leaders such as Spillett must always maintain a delicate balance between appropriate compensation and public concern. They are public leaders after all. They must be sensitive to the steady erosion of public trust in their organizations and the need for reasonable, not excessive compensation. They should not have to take a vow of poverty to serve, but neither can they earn so much that their self-interest seems in charge.
If Congress wants to find a silver lining in all this gold, it should consider pay standards for public leaders of all kinds, and not just those who work in charitable organizations. Some of these leaders receive their checks directly from the U.S. Treasury, but many others are hidden from view because their salaries are paid through contracts or grants. But no matter how they get their pay, they are all public leaders nonetheless, and are bound by a common commitment to what Alexander Hamilton called "extensive and arduous enterprises for the public benefit."
The Obama administration is starting to get the point. Its "pay czar" capped CEO salaries at bailout banks at $500,000 per year, and is working to find some answer to the compensation puzzle on Wall Street. The administration is also beginning to wonder whether it is time for a cap on total compensation for its contractors and grantees.
If there is to be a cap, it should not be a penny more than the $223,500 that the chief justice receives. The nation would quickly find out how long the penury toward government's top officers will last. Contractors and grantees would fight the cap with every lobbying dollar they have, of course. But if Congress and the president stand firm, perhaps they can restore at least some balance to the CEO pay scale.
April 22, 2010; 9:23 AM ET |
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