Charity Leaders Split Over Ethics of Goodbye Gift to United Way Chief

Less than five years after a financial scandal caused major fund-raising problems for United Ways — and the more than 45,000 charities that rely on them for support — leaders of

the federated campaigns are worried they may soon have to deal with another spate of public outrage.

The concern has been prompted by a $292,500 gift to Elaine L. Chao, who plans to resign this summer after nearly four years as head of United Way of America. The goodbye gift will be provided by several members of the United Way of America board (The Chronicle, May 30).

United Way leaders and other charity executives are divided about whether the payment is ethical, but people on both sides of the debate agree that such a large sum could be perceived by donors as an inappropriate reward for the head of a charity to accept and might cause contributors to withhold their gifts.

Ms. Chao and the United Way board have objected vigorously to the criticism, arguing that because the money was coming from the pockets of board members, it should not be a subject of donor concern. Six to eight members of the 45-person board have agreed to provide the money, and all have asked to remain anonymous, according to United Way of America.

The board members have said that they want to reward Ms. Chao for a job well done. Their explanation has been questioned by those who point to the agreement the board made with Ms. Chao when she was hired in 1992. Under that agreement, United Way promised to give Ms. Chao 18 months of pay if she was asked to leave before 1997. Because the gift is the exact amount that she would have received had she been fired, some observers suggest that the payment was made to head off any accusations that United Way of America had reneged on its promise.

However, board members and Ms. Chao said that that was not the case and that she resigned voluntarily.

Ms. Chao was appointed to head United Way of America after a controversy erupted over the $465,000 compensation package and financial practices of her predecessor, William Aramony.

Many United Ways are still having trouble persuading donors to put Mr. Aramony’s financial behavior out of their minds. Last year, he and two colleagues were convicted of swindling the charity out of hundreds of thousands of dollars. Mr. Aramony has continued to command attention from the jail cell where he is now serving time. Last month he won significant publicity when he sued United Way of America for $5-million, alleging that he is owed money under two pension plans and an employment contract the charity had set up for him.

Some charity leaders said the payment to Ms. Chao could undo the strides that United Way has made to regain public confidence after the Aramony era. “Given the image of the organization and what it needs right now, this is inappropriate,” said the executive director of a United Way who asked to remain anonymous.

“My volunteers were angry and upset about the news,” said Fred L. Evans, executive director of the United Way in Danville, Va.

“We’ve received more calls on this than about Aramony,” said Mr. Evans. “Regardless of the intent, this is going to raise doubts. This is an excessive payment, and I think this thing is going to snowball.”

Charities Concerned

It is not just United Way executives who are concerned by the potential image problem.

“It really does raise questions,” said the Rev. Thomas J. Harvey, president emeritus of Catholic Charities USA, whose affiliates receive about $82-million a year from local United Ways.

Ms. Chao was on the job for less than four years, he noted. He questioned whether anyone could learn a system so quickly as to justify such a reward. “What charity or company would say, ‘O loyal employee, here’s $300,000 after three years’?” he asked.

Steve Delfin, director of public relations and marketing for the National Association for Home Care in Washington, said: “This is too large a sum to accept without further explanation to the giving public.”

Mr. Delfin was a vice-president of United Way of America in the 1980s under Mr. Aramony.

Several leaders of local United Ways and of other charities said that the payment to Ms. Chao appeared to be at odds with the United Way of America Code of Ethics. That code was instituted in 1993 as part of Ms. Chao’s effort to clean up the organization after the scandal over Mr. Aramony’s behavior.

According to the code, “No employee should accept any gratuity or favor for doing his or her job. U.W.A. employees do not solicit or accept gratuities, gifts, or favors, other than promotional gifts of nominal value.”

Some United Way officials have said that Ms. Chao’s bonus looks like a violation of the code, since it was a reward for doing her job.

Paula Harper Bethea, chair of the United Way of America board, said the payment did not conflict with the ethics code because Ms. Chao will no longer be an employee when she gets the money. It will come in two installments, the first early next year and the second in 1998.

Ms. Bethea is the head of a 25-member committee that has begun a search for Ms. Chao’s successor.

Some leaders of local United Ways said they were pressing the national organization to provide them with answers to questions about the payment. A few have asked whether board members planned to make the gift to Ms. Chao from their own wallets — or from corporate coffers they controlled. Others have asked whether board members would give the money to United Way first in order to claim a tax deduction and funnel the gift through the charity’s books.

United Way of America officials told The Chronicle they did not have answers to those questions. Charles Kolb, the organization’s general counsel, said the details of how Ms. Chao’s payment will be made are still being worked out.

Assuaging Fears

Several United Way leaders said they felt that the worries about the farewell gift were overblown.

Larry Norvell, executive director of the United Way of Columbia-Willamette in Portland, Ore., said that he was relieved when he was told by United Way of America officials that no part of the payment would come from United Way assets. He said that armed with that information, he felt he could defend his local United Way against any suggestion that donors’ contributions were going toward Ms. Chao’s departure pay.

It is too early to tell if the payment will put a damper on contributions. Most United Ways have closed their campaigns for the year, although those in a few big cities are still in the process of raising money.

The big concern, United Way leaders said, is what will happen to charities that depend on United Way — and to the people they serve.

“I wish this had been done differently,” said Larry Walton, executive director of the Baltimore United Way. “You have to remember that the only people who will get hurt are the people in need. There are innocent victims.”