M A NAGING
Boards Juggle Recruiting Needs
With Public Outcry Over High Pay
es executive compensation, found that
leaders of companies in the Standard &
Poor’s 500 suffered pay cuts of nearly
8 percent in 2009. Nonetheless, a huge
gap remains. For-profit executives made
a median salary of $7.5-million in 2009,
according to Equilar, far more than
even the highest-paid nonprofit and
foundation chief executives for whom
The Chronicle has 2009 pay data.
Continued from Page 1
At many charities, revenues remain
weak, due to reduced support from individuals, foundations, and state governments that were hard hit during the recession.
“There is downward pressure on pay
because there is downward pressure on
revenues,” Mr. Pagoaga says.
But some experts say an equally important factor is growing populist anger at high salaries for any executive
whose organization depends on federal
or state support. Big bonuses for bank
executives who needed federal bailouts
and the huge salaries paid to city leaders in Bell, Calif., are recent flashpoints
in business and government.
The charity world came under the microscope in March, when four U.S. senators questioned the $988,591 in salary, bonus, and benefits paid in 2008 to
Roxanne Spillett, president of the Boys
& Girls Clubs of America, in Atlanta.
The senators’ concerns about Ms. Spillett’s salary and other spending at the
charity continue to hold up legislation
that would extend a large annual grant
to the charity from the Justice Department. (Ms. Spillett’s compensation was
lower in 2009, down to $635,406, according to figures the charity provided
to [I]The Chronicle. See article on Page
“It’s fair to say that in what I would
call a Tea Party environment, charity
compensation is surely going to be an
explosive political if not also a regula-
tory issue,” says Michael W. Peregrine,
a Chicago lawyer who advises several
Calculating compensation in this environment takes care, say recruiters
and nonprofit board members. For example, when the Greater Twin Cities
United Way, in Minneapolis, began a
search for a new chief executive in early
2009, the organization set a broad sala-
Tips for Nonprofit Boards
on Setting CEO Compensation
Charity boards should consider
restructuring executive-pay packages that may give the appearance
of lavish compensation, even if the
contracts were justifiable when they
were signed, says Michael W. Peregrine, a Chicago lawyer who works
with several charities. Among his
recommendations for boards:
n Consider revising existing contracts to avoid making large deferred-compensation payouts that
will attract unwanted attention to
n Eliminate “tax gross-ups”
that cover the tax that an execu-
tive would have to pay on certain
fringe benefits, like cars and social
n Add a “clawback” provision to
allow the charity to recoup some in-
centive payments to the chief execu-
tive if the organization’s financial or
program achievements falter.
n Make sure the paper file that
justifies the chief executive’s salary,
including benchmark comparisons,
n Check in regularly with a compensation consultant, as the standards for executive pay appear to
be in flux. —BEN GOSE
JOYCE DOPKEEN/ THE NE W YORK TIMES
Compensation paid to Roxanne Spillett, leader of Boys & Girls Clubs
of America, drew unwanted attention by lawmakers earlier this year.
ry range for the job early in the process,
and the search committee focused on
identifying the right candidate through
a national search, says Chris Policinski,
who chaired the committee.
When the board tapped Sarah Caruso as its top candidate, it used several
types of information to determine what
she should be paid, says Mr. Policinski,
the president of Land O’Lakes, in St.
Paul, and chairman of Greater Twin
Cities United Way’s board. The board
used data provided by United Way
Worldwide on salaries paid at compa-rable-size United Ways and “real time”
data from its executive-search firm,
Spencer Stuart, about what new hires
at other charities were being paid.
The board also assessed whether Ms.
Caruso’s compensation would attract
unwanted news-media attention. “We
did think about how her compensation
would be perceived,” Mr. Policinski says.
“Anybody who runs a senior-level search
now, particularly in the nonprofit arena,
needs to be concerned about that.”
In the end, Ms. Caruso’s “base pay”
was set at about the same level as that
of her predecessor, Lauren Segal, says
Mr. Policinski. Ms. Segal earned a sal-
ary of $256,770 for 11 months of work in
2009 (plus another $115,567 in deferred
compensation and other payments).
Some charity and foundation leaders augment their salaries by serving
on the boards of for-profit companies.
For example, Risa Lavizzo-Mourey,
president of the Robert Wood Johnson
Foundation, in Princeton, N.J., earned
total compensation of $1,041,330 in
2009. Her pay included a $409,806 deferred-compensation payment, earned
over three years, that was “designed to
encourage her continued leadership of
the foundation,” says David J. Morse, a
In addition, Dr. Lavizzo-Mourey received $269,000 for serving on the
board of Hess Corporation and $160,000
for serving on the board of Genworth
Financial. Combined with her total
compensation from the foundation,
Dr. Lavizzo-Mourey earned more than
$1.47-million in 2009.
While salaries for charity executives
aren’t expected to rise much in the near
term, experts say, some forces may
drive compensation higher eventually.
The skills required to run large charities now, when cash is tight, are significantly different than they were just
three years ago, says David E. Edell,
an executive recruiter in New York.
That means an employee who was being groomed for the top job in 2007—
perhaps someone skilled at managing
programs—may no longer be the right
person to lead the charity in 2010.
Meanwhile, some of the talented mid-level executives Mr. Edell tries to recruit for CEO positions say they aren’t
interested, fearing that too much of
their time will be consumed with maximizing revenues and minimizing costs.
“Many people, when you reach out to
them, say, ‘You know what, that’s not
the job I want to do,’” Mr. Edell says.
Compensation experts note that the
laws of supply and demand suggest that
with a smaller pool of potential executives, salaries should rise as a result.
Alternatively, if pay continues to stagnate, the nation’s charities might end
up with a weaker group of leaders.
Larry Reissman, a Boston-based
principal at Buck Consultants, an executive-compensation company, points
out that just three or four years ago,
recruiters talked about increasing salaries to make the jobs more attractive
to managers at for-profit companies. If
nonprofit salaries remain constrained,
he says, fewer of those talented managers will want to cross over.
“How low is low enough?” Mr. Reissman asks. “And how low is too low?”
Noelle Barton, Marisa López-Rivera,
and Alex Richards contributed to this