Compensation Review Flawed at Charlotte’s United Way, Report Alleges

A controversy over leadership and compensation at the United Way of Central Carolinas has deepened as a new investigation shows that the head of the organization sought to increase her pension benefits significantly, ignored a lawyer’s concerns about possible tax-law violations, and made efforts to keep the $2.1-million pension deal confidential.

The board fired Gloria Pace King in September after news of the deal eventually reached the public and shook donors’ confidence in the organization.

It also asked Bob Sink, a Charlotte lawyer, to lead a seven-member committee to pinpoint breakdowns and suggest changes to keep them from happening again. The committee’s findings were released last week.

Ms. King, for the most part, has maintained a public silence on the report’s findings. She did, however, in an interview published in the Charlotte Business Journal, issue a general defense of her 14-year tenure at the United Way.

She said she helped raise awareness of the need for better pay for nonprofit executives. She noted that the organization raised more than $500-million under her leadership. The $45.3-million raised in her final annual drive in 2007 ranked fifth among United Ways nationally in donations per resident of the region served.

“I feel like I had a phenomenal experience and I had the experience of a lifetime,” she told the Business Journal. “And I feel like I, up until now, put Charlotte’s health and human-service community in a very positive place. And I put that United Way on the map locally and certainly on the map nationally. And I am quite proud of that.”

‘Commanding Presence’

The investigative committee report last week described Ms. King as a leader with a “commanding presence,” and said she pushed aggressively for a supplemental pension after learning some of her peers at other large United Ways had better benefits than hers.

She did so, the report said, without telling board members of key decisions that had been made in crafting the pension deal, or of the warning from a lawyer who said she was already so well paid that an additional pension might violate Internal Revenue Service rules against excessive compensation for nonprofit leaders.

When the board’s executive and compensation committees approved the pension on September 14, 2006, the report said, they did so with far too little knowledge of the national context, or the twists and turns the plan had taken before reaching them.

“The compensation and executive committees, wittingly or unwittingly, approved the (pension) without sufficient information, attentiveness, independence and sensitivity,” the report said, “abetted by a flawed process in which authority and responsibility were ill-defined and broadly delegated.”

Mr. Sink said in releasing the report that he saw no evidence of criminal activity — just poor board oversight of a strong-willed chief executive officer.

“This is not villainy,” he said. “When you get a large board and very busy people, there can be fallout from that kind of arrangement.”

The board chairman, Carlos Evans, who wasn’t involved in approving the pension, praised the report, calling its recommendations a road map for fixing problems and restoring public confidence.

“Someone once told me that there’s no antiseptic like the light of day, and I think in many respects the work of Bob’s committee has provided that antiseptic,” he said.

‘Top Hat’ Pensions

The report traces the plan to January 2004, when Ms. King sent an e-mail message to two senior staff members asking them to look into the supplemental pensions some highly paid executives receive to override IRS limits on their retirement-plan contributions. She reportedly had heard that other executives in large United Ways had been receiving the “top hat” pensions.

The staff members asked a lawyer for help. But when the lawyer warned of possible IRS violations, the report said, Ms. King directed that she no longer be included in meetings on the subject.

Two days before the compensation and executive committees were to vote, the report said an actuarial consultant running the numbers sent Ms. King a draft of his recommendations by e-mail. He suggested a plan that would pay her $729,000 by 2010, which would be set aside for her in installments.

Two hours later, according to the report, Ms. King responded by suggesting a different plan — one that would more bring her more than $2.4-million.

The consultant inserted two new pages in his report showing the $729,000 plan and a $2.1-million version based on Ms. King’s suggestions. The last-minute changes apparently weren’t shared with the board members before the meeting, the report said.

The consultant recommended the $729,000 plan to the 11 board members present for the meeting but advised them that the $2.1-million plan was also reasonable. He cited four studies, including one from the General Accountability Office — Congress’s audit arm — to support that belief. But no written reports of the studies were given to committee members.

The investigative panel read the reports and found that none showed whether similar pension benefits were common among United Ways.

The board members ultimately picked Ms. King’s proposal. They agreed to communicate the plan to the full board of more than 60 members and said they’d develop a communications plan to “ensure that all stakeholders understand the issue.”

But the full board didn’t learn of the deal until news-media outlets reported it in June after reading the organization’s informational tax return.

Ms. King, the report said, sought several filing delays to put off public disclosure. When worried staff members tried to put together their own communications plan, the report said, Ms. King told them the full board wasn’t on a “need-to-know” basis concerning it.

The report said Ms. King kept the board in the dark on other key issues as well. It said during a November 2007 fund-raising victory party, a board member heard her and another senior staff member discussing how they had made travel plans as the first employees to take advantage of a new sabbatical program offering six weeks’ leave with pay to all employees with 10-plus years of service.

When questioned by the board member, the report said, Ms. King replied that the program did not require approval by board members and none had been sought.

“That struck us all as a pretty unusual situation,” Mr. Sink said. “It did show that she took a lot of authority on herself for running the organization.”

The board’s executive committee later placed the sabbatical program on hold, over Ms. King’s objection, pending an overall review of all compensation and benefit issues. It was supposed to be conducted in the first quarter of this year but hadn’t been done as of June.

National Review

The Charlotte controversy so concerned United Way of America officials that they surveyed the 30 biggest United Ways across the country to see if they were following recommended safeguards, including obtaining objective data from comparable organizations before setting CEO pay.

All except the Charlotte United Way were in compliance, said Joe Haggerty, chief operating officer of the United Way of America.

“The whole process was not followed properly” in Charlotte, he said. “We support doing it by the book.”

In the wake of the report’s release, the 11 board members who approved the pension have not responded to news-media calls seeking comment.

The board’s lawyer, Russ Sizemore, said at a press conference that the board is checking to make sure it complies with the IRS rules, which require nonprofit boards to check peer organizations’ data before setting executive pay. It is unclear whether the four studies cited by the actuarial consultant would qualify; the report released last week steered clear of any opinion on the matter.

“We’re not prosecutors,” Mr. Sink said. “We’re not intending to assign blame. We are not the decision-makers. That remains for the United Way.”

Mr. Evans said the board, during its mid-January meeting, will take up the report’s recommendations.

The report called for a smaller board with tighter fiscal oversight, limited power for the executive committee, mandatory checks of peer compensation data, and a new governance committee with independent-minded members who will challenge the organization.

Mr. Evans said the board has already made the organization’s operations more open by posting board minutes on its Web site. He hopes many of the investigative committee’s recommendations will be adopted next month as a first step to winning back the public’s trust.

“It’s going to take time,” he said. “And the way we will do it is through our actions.”