Pension Dissension

Just 10 days before the kickoff of its annual fund-raising campaign, the United Way of Central Carolinas found itself making the kind of headlines every nonprofit organization dreads.

Its board of directors announced that public outcry over the $2-million pension awarded to its longtime chief executive, Gloria Pace King, had crippled her ability to lead the organization. The board, whose executive committee had approved the deal in 2006, gave her about a month to resign or be fired, then apologized to donors for what its members called “a collective breakdown at many levels” of the organization.

They appointed a committee to investigate what happened. The leaders also declared that while they would pay Ms. King up to $676,000 remaining on her three-year employment contract, they planned to exercise an option allowing them to cancel up to $1-million or more in future pension payments. And they announced that they had replaced her on an interim basis with Mac Everett, a retired bank executive and longtime civic activist.

Then they did what they always do this time of year: They asked for donations to the annual campaign.

“We owe the community a sincere apology,” Graham Denton, chairman of the board, told journalists assembled to hear the August announcement. “We hope the actions outlined here will encourage the community’s support of our annual workplace campaign. Now, more than ever in these tough economic times, our community cannot afford to reduce our commitment to help better the lives of residents in our region.”

Watching from the back of the room during the press conference was Ms. King’s lawyer, William Diehl. He said the board approved the pension after evaluating the compensation of leaders in similar positions, but now wants to back out because of public criticism. He said Ms. King is ready to fight in court for the rest of the pension money.

“She ran a $45-million agency,” he said. “She wants to be reasonably compensated like anyone else who is similarly situated.”

Anonymous Tip

Ms. King’s compensation package has been the subject of intense speculation and public outcry ever since a Charlotte television station, WCNC-TV, and the local newspaper, The Charlotte Observer, began reporting on it early this summer. Stuart Watson, an investigative reporter at WCNC, said the original tip came via an unsigned letter in which the writer urged him to check out the United Way’s 2006 Form 990 filing with the Internal Revenue Service.

The tax form placed Ms. King’s salary and bonus at $364,999, her retirement-plan contribution for the year at $822,506, and her expense account at $35,862. Her salary has long provoked mild criticism in the region, but the huge pension payment was news to many. Donors voiced angry protest.

Board members explained the large pension payment by saying it was essentially playing catch-up because Ms. King, now 63, would reach retirement age in several years. They said the pension plan was originally supposed to be put in place in 2001, but the board had failed to act on it.

Members of the 2001 board and those who have served more recently have been unable to explain why. They said they approved the plan because, without it, Ms. King’s pay threatened to bump against IRS ceilings on retirement benefits that would have kept her package below 60 percent of annual salary — the payment level the board tries to give its retirees.

One compensation expert questioned why the board would be scrambling to put together a pension deal so late in the tenure of a chief executive who arrived in Charlotte in 1994.

“Did this issue never come up in 14 years?” asked Linda Crompton, president of BoardSource. “They had years and years to discuss retirement. I don’t know why they would find themselves in that situation.”

Board members have struggled to answer such questions. They have blamed unspecified communication problems and turnover on the board, but haven’t been able to offer more specific answers.

They at first defended the package, calling Ms. King a top performer who was worth every penny. When she came to Charlotte, the organization had missed its fund-raising goals two consecutive years. Board leaders lured Ms. King away from the United Way in Cleveland, where she was praised for her service as senior vice president.

Under her leadership, the Charlotte organization prospered. It posted a $45.3-million effort last year, and has brought in more donations per capita than 90 percent of other large United Ways. It ranks as the nation’s 18th largest in terms of revenue raised, and United Way of America officials call Ms. King a well-respected leader among United Way executives nationally.

But that didn’t stop criticism of her pay. The Observer studied the full compensation packages of CEO’s at 31 United Ways, including those in bigger cities — such as Los Angeles and New York — and found Ms. King was the best-compensated chief executive.

Support on the board wavered. Some on the 64-member panel complained that they were being criticized for a pension package they didn’t even vote on. The executive committee approved the deal in 2006 without briefing the full board.

“That’s a clear error,” Ms. Crompton said. “You don’t have executive committees making big decisions that affect the budget and possibly the reputation of the agency without the knowledge and consent of the full board.”

On September 3, the organization kicked off its annual campaign with two unusual announcements: that Mr. Denton had resigned as chairman and that because of “the current economic conditions and environment,” the United Way would not set a financial goal for the campaign.

Mr. Denton, a retired bank executive, said in an open letter to his board colleagues that some of them had lost trust and confidence in his leadership.

“Some have even expressed a sense of betrayal by your board leadership,” he wrote. “My hope is that this decision, taken along with the other board actions will represent the beginning of a new era for your United Way.”

Lingering Questions

But questions continue to swirl around the pension package. Did the board study comparable packages for other CEO’s before acting? If it was so necessary, why did the board hesitate so long before adopting it?

The United Way hopes the committee appointed by the board will sort things out. Headed by a prominent Charlotte lawyer, the panel has been asked to find out what went wrong and suggest changes to keep it from happening again.

The board’s leaders say that, whatever the result, public outcry has convinced them they were mistaken to approve such a sizable pension package.

“It’s very clear the community at large thinks it’s unreasonable,” said Carlos Evans, a Wachovia bank executive who is the board’s new chairman.

He wasn’t on the executive committee at the time the pension deal was struck. Mr. Denton was, but has struggled to explain the rationale and process followed. He says it’s hard to determine what went wrong when so many members have rotated through the board since 2001.

The board has refused to make the pension contract public, and has also declined to release copies of board minutes or compensation studies that might shed light on the issue. “The records aren’t complete enough for that,” Mr. Denton said. “There’s too many holes.”

But Ms. King’s lawyer said he doesn’t buy that. Mr. Diehl said he has a copy of a compensation study the board conducted before approving the pension. He declined to make it public, however.

“She relied on them to run [the agency] the way it was supposed to be run,” he said. “She wasn’t told that these people didn’t know what they were doing. That’s sort of crazy.”

Mr. Denton and others have said they expect the board will be revamped as a result of the committee’s inquiry; many current board members say they expect it will be made smaller (from its current size of 64). The committee isn’t expected to release its findings until later this year, however, and the fund-raising campaign, which concludes mid-November, might be over by then.

The campaign got off to a shaky start. More than a dozen companies delayed their campaigns for employees, United Way officials say, and two have cited the King controversy in declining to participate in this year’s Pacesetter campaign. That campaign, a preliminary fund-raising effort at large companies, came up nearly a million dollars short of last year’s total.

Mr. Everett, the interim CEO, is hoping the campaign will rebound, despite the increasingly tough economic climate and the pension controversy. He is pleading with potential donors, asking them to remember the many needy people served by the 91 Charlotte-area charities supported by the United Way.

“What’s done is done,” he said. “I don’t believe you forget, but I do believe you forgive.”