Salaries Rise Modestly at Charities

Officials at biggest groups see gains that just beat inflation, survey finds

Pay raises for top executives at many of the nation’s largest non-profit organizations barely outpaced inflation last year, according to The Chronicle’s seventh annual compensation survey.

The survey of 230 charities, foundations, hospitals, and universities found that the median sal ary for chief executives was $209,914, meaning that half the executives earned more and half earned less.

The survey includes 20 private foundations, where the median salary for chief executive officers was $345,862.

Among all groups in the survey other than private foundations, the median salary for 137 executives whose pay for both 1997 and 1996 was reported to The Chronicle was $199,788. That was up 2.9 per cent — slightly more than the 1997 inflation rate of 2.3 per cent.

For the fifth consecutive year, John W. Rowe, president of Mount Sinai Medical Center, in New York, received the top salary among chief executives in the survey. He earned nearly $1.2-million in 1997, plus $216,250 in benefits. His pay was eclipsed, however, by that of the survey’s top earner, Wayne Isom, chairman of the department of cardiothoracic surgery at Cornell University, who earned $1.7-million.

The survey monitors base salary, bonuses, benefits, and expense allowances paid to the chief executive and highest-paid official other than the C.E.O. at many of the nation’s biggest non-profit institutions.

Charities selected for the survey were among those that appeared in The Chronicle’s 1997 Philanthropy 400 list of organizations that raised the most in private donations. In addition, the survey includes the nation’s 20 largest private foundations, ranked according to total assets.

Although the survey shows what many top non-profit officials earn, it does not necessarily reflect all of the non-profit world’s largest salaries. One reason is that some small organizations may pay their executives more than big groups do. In addition, some large organizations do not appear in the Philanthropy 400 because they do not raise much in private gifts. Also not included are many religious groups that choose not to disclose their finances.

Among the compensation survey’s key findings:

* Twenty-two chief executives earned $400,000 or more in salary in 1997, and all but three were heads of grant-making foundations, hospitals, or universities. The exceptions were Joseph Volpe of the Metropolitan Opera Association ($500,000); Richard D. Schultz of the United States Olympic Committee ($478,140); and Edwin J. Feulner, Jr., of the Heritage Foundation, a conservative think tank ($437,050).

* Seven C.E.O.’s made less than $60,000, and two of them — Robert C. Macauley of the AmeriCares Foundation, an international-relief agency, and James C. Dobson, Jr., of Focus on the Family, a religious charity — continued their customary practice of drawing no salary.

* At 43 organizations, an employee other than the chief executive was the highest-paid. Top earners included University of Southern California football coach John Robinson ($527,000) and Daniel Barenboim, music director of the Chicago Symphony Orchestra ($470,833).

* From fiscal 1996 to 1997, the median salary for female chief executives rose at a faster rate than for male C.E.O.’s. The median salary for the 28 women whose pay for both years was reported to The Chronicle rose by 7.3 per cent. Among 126 men whose pay for both years was reported, the median salary rose by 3 per cent. But measured in total dollars, male chief executives still earned more than female C.E.O.’s: The 192 male chief executives in this year’s survey earned a median salary of $216,055, versus $175,120 for the 38 female chief executives.

* Fifty-four chief executives received fringe benefits totaling $50,000 or more, with Harold M. Williams of the J. Paul Getty Trust leading the pack with $357,444 in benefits. The benefits included a contribution to a supplemental retirement plan for Mr. Williams, who retired in January.

Turnover among chief executive officers was especially high. Nineteen C.E.O.’s listed on this year’s survey departed during or after the 1997 fiscal year and no longer hold the position. In last year’s survey, there were only eight instances of turnover among C.E.O.’s.

While most groups did not separately report severance pay for departing executives, there were exceptions.

For instance, Hadassah, the Women’s Zionist Organization of America, reported that its chief financial director, Sheryl L. Weinstein, who left two months shy of the close of the fiscal year after working 131/2 years for the organization, received $133,000 in salary for those 10 months. She also received $112,700 for 195 days of accrued vacation and two years’ severance pay of $300,000, for a total of $545,700. Her benefits for fiscal 1997 totaled an additional $9,600. Part of her compensation was paid by an affiliated organization, Hadassah Medical Relief Association. Laurence Seigel, Hadassah’s chief financial officer, says the severance payments were part of “reaching an agreement” under which she left Hadassah.

Helping to shape salary decisions at some non-profit organizations is a new federal law that allows the government to punish charity officials who receive or bestow inappropriately lavish salaries or perks. The law’s full effects have yet to be felt, since the Internal Revenue Service just proposed rules this summer on how to enforce it (The Chronicle, August 13). But experts in non-profit compensation say the measure already is influencing pay decisions at some organizations.

“There is an awareness, almost a skittishness, on the part of boards to make sure that they are defending themselves and being fidu ciarily responsible,” says James Abruzzo, head of the non-profit-practice department at A. T. Kearney, a management-consultant and executive-search firm.

Mr. Abruzzo says demand has “increased dramatically” for compensation surveys for non-profit clients that want to know how their executive pay and benefits stack up with those of similar organizations. In addition to concern about the new law, Mr. Abruzzo says, charities want to be sure that they are offering salaries competitive enough so that talented executives are not tempted to leave the organization.

At the Wildlife Conservation Society, a charity that runs several zoological parks and facilities in New York, including the Bronx Zoo, such a review led to a 13-per-cent raise for the organization’s president, William Conway. With the increase, he made $260,000 in 1997, up from $230,000 in 1996.

“The findings indicated that given the complexity of the society’s chief executive’s duties, the performance of the individual in that role, and comparable salaries for comparable positions in both the not-for-profit and for-profit industries, that the appropriate compensation increase would be $30,000,” says John Hoare, the society’s comptroller.

Mr. Conway has been with the society for 42 years, more than 30 as the top executive, and has presided over “an institution that has just exploded in growth in that period,” says Mr. Hoare. Yet, he says, the consultants’ review marked the first time in at least two decades that the society’s board asked for an outside assessment of senior officers’ compensation.

“This was a pre-emptive action” because of the government’s new rules on excessive compensation, Mr. Hoare says.

At some organizations where fund raising or other business operations were successful last year, executives got big raises, bonuses, or both. But at groups that faced difficulties, salaries sometimes fell or stayed the same.

Mr. Feulner, the Heritage Foundation’s president, saw his pay rise 13 per cent last year through a combination of salary and bonuses that totaled $437,050.

Lew Gayner, Heritage’s vice-president for finance and operations, says Mr. Feulner’s compensation was based on how well he met specific institutional goals. He says Mr. Feulner earned especially high marks in 1997 in two areas: “How good our donors feel about the conservative movement and the Heritage Foundation in particular, and what impact we have on federal policy.”

Success in those areas helped earn Mr. Feulner a bonus of $202,050 last year, according to Mr. Gayner.

In fund raising, for example, Mr. Feulner spent much of 1997 preparing for a campaign tied to the Heritage Foundation’s 25th anniversary this year. By last December — the official start of the two-year, $85-million campaign — Heritage had already secured more than $25-million in pledges.

While Mr. Feulner benefited from his group’s success, other executives took a cut in pay.

Susan Corrigan, chief executive of Gifts In Kind International, an Alexandria, Va., group that procures corporate donations of goods for charities, says she requested that her 1997 bonus be eliminated and that her salary be reduced to its 1995 level for three months because “cash reserves were not where I wanted them to be.”

Gifts In Kind ran into repeated difficulties covering its overhead expenses in 1997, and some of its client charities have complained that it distributes items that are not usable.

Ms. Corrigan’s 1997 salary of $143,491 was 7 per cent lower than in 1996, when her salary was $153,470. Even so, it was 12 per cent higher than in 1995, when she earned $128,015.

Among United Way executives, 8 of 14 included in The Chronicle’s compensation survey both last year and this year had little or no change in pay.

For some, the flat compensation figures reflected stalled fund raising. Joseph Haggerty, president of the United Way of Greater Los Angeles, for example, says he asked his board to keep his pay last year at its 1996 level — $195,000 — because the 1996-97 campaign was progressing slowly. It closed just $100,000 ahead of the previous year’s, at $58.1-million.

“The whole job at this United Way is turning it around and getting it growing again,” Mr. Haggerty explains. “And personally, I just didn’t feel we had enough growth to justify a raise.” Heading into 1998 the outlook was somewhat better, and Mr. Haggerty accepted a 4-per-cent pay raise. The United Way’s 1997-98 campaign raised 1.5 per cent more than it did the previous season.

Mr. Haggerty says that even in good financial years, most United Way pay raises tend to be modest because of lingering memories of former United Way of America President William Aramony. Mr. Aramony’s high compensation and management abuses became public six years ago.

“When you have a bad incident, it just makes everybody very conservative and cautious,” Mr. Haggerty says.

Oral Suer, president of the United Way of the National Capital Area, in Washington, started shunning pay increases long before Mr. Aramony’s problems came to light. Since 1988, Mr. Suer has earned the same $196,000 salary.

“This is something of my own choosing,” he says. “My personal philosophy is, my compensation is adequate, and so I haven’t sought any more.”

Mr. Suer’s philosophy contrasts sharply with what some management consultants say is a growing trend in the non-profit field: awarding significant perquisites or salary supplements.

One example included in The Chronicle’s survey this year: Lawrence J. Wilker, president of the John F. Kennedy Center for the Performing Arts, in Washington. He earned $278,228 and also received $52,784 last year to cover half of the mortgage interest on his home, according to Kate Kile, senior accountant. The interest-payment arrangement is repeated annually. Mr. Wilker uses the home for job-related entertainment, Ms. Kile says.

A perquisite that management consultants say is growing in popularity is the “signing bonus,” a lump sum of cash paid to an incoming executive as an inducement to join a charity or foundation.

“We’re seeing it particularly with C.E.O.’s, and we’re seeing a little bit of it with senior development officers, where there are significant competitive elements in terms of recruiting people,” says David Edell, president of Development Resource Group, an executive-search company that specializes in working with non-profit groups.

Such bonuses do not have to be reported separately on informational tax returns and are often folded into the amount charities report for salary payments. Consultants, however, say signing bonuses now reach as high as $25,000 at some non-profit organizations. Many times, they say, a charity’s board will agree to pay the bonus as a way to recruit a sought-after executive and yet technically remain below the annual salary cap for the posi tion.

While perquisites like signing bonuses, car allowances, private-school tuition, and performance bonuses may appeal to some charity boards, others resist them as antithetical to their philanthropic mission.

George Penick, chairman of the board of the National Charities Information Bureau, said the board did not even consider paying a signing bonus or offering other out-of-the-ordinary benefits when it hired William P. Massey to become president of the charity-watchdog group this summer.

“We didn’t think it was financially prudent,” says Mr. Penick, who is president of the Foundation for the Mid South, in Jackson, Miss. Beyond that, he says, “my guess is that if any candidate had asked for that kind of super-treatment, the search committee would have said, ‘Well, this is not the person we want. This person is more interested in self-enrichment than in being a true leader for the mission of this organization.’ ”

Mr. Massey, who began his duties last week, had been executive director of the Kathleen Price Bryan Family Fund, in Greensboro, N.C., where he earned $107,000, plus benefits. At the charities bureau he is being paid $130,000, Mr. Penick says. The bureau’s former president, James J. Bausch, made $125,000.

World Vision, an international-relief agency in Federal Way, Wash., took a similarly measured approach in setting the salary for its new president, Richard E. Stearns, who took over June 15 from Robert A. Seiple. Mr. Stearns came to World Vision from Lenox Inc., a maker of fine china, where in the most recent fiscal year he earned more than $700,000 in salary and other compensation as chief executive. At World Vision he is being paid $200,000, with few perks, according to John Jemelian, senior vice-president for finance and administration.

“It’s really the normal benefits,” Mr. Jemelian says of the new president’s compensation arrangements. “Health and welfare, our typical retirement thing, a car allowance. But there are no country clubs, no signing bonuses, no incentive programs tied into his compensation package. It’s really pretty vanilla.”

Mr. Jemelian says the World Vision board considered paying Mr. Stearns $180,000 and sweetening the package with $20,000 in tuition aid for the president’s five children. Such a perk would not have to be reported separately on the charity’s informational tax return, though it would need to be included in the compensation figures.

But the board nixed the idea, Mr. Jemelian says, in large part because it wanted to make the president’s compensation “as open and as non-objectionable as possible to the donor community.

“Rather than maybe have some hidden things that wouldn’t show in the immediate salary package but that would show as a footnote or be buried somewhere else, we just wanted to be up-front.”

Mr. Jemelian believes that the informational tax return that charities file with the I.R.S., called the Form 990, should do a better job of breaking down the components of executives’ salaries.

Some groups already do that voluntarily. The Boy Scouts of America, for example, prepares a separate “analysis” page that it gives to journalists who ask for the 990. The analysis breaks down the compensation figures into salary, car allowance, and “excess life-insurance premiums.” It also differentiates deferred pay contributed to a retirement plan from other benefits, and it lists the total number of years that top executives have been employed by the Boy Scouts to give context for the salaries.

Jere Ratcliffe, chief Scout executive, for example, has worked at Boy Scouts for 38 years. His compensation, reported as $344,653 on the Form 990, includes a $4,136 car allowance and $14,391 in life-insurance premiums.

Mr. Jemelian, of World Vision, says being sensitive to the public’s desire for accountability is important, especially as new government rules make the Form 990 available to a wider and wider audience. Not only must charities make the return available for inspection to anyone who requests it, but the I.R.S. is also encouraging charities to post their Forms 990s on the Internet.

“In the kind of work that we do,” says Mr. Jemelian, “we’ve got an obligation to our donors as to how the money is being spent.”

Katharine LaBruna, Domenica Marchetti, Jennifer Moore, and Grant Williams contributed to this article.