One of the side effects of increased income disparity is the assumption in some circles that anyone who has a “big” job deserves a lot of money, whether or not the circumstances or their performance warrants it. It wasn’t all that long ago that the prevailing assumptions were radically different: CEOs (except maybe in the auto industry) did not see themselves as near royalty, and most well run businesses recognized that firing staff in downturns and rehiring was costly (search time and training are bigger costs than most top brass admit to themselves).
A great piece at the Village Voice, “The Nonprofit 1 Percent” describes how this logic plays out in the not-for-profit sector. The centerpiece of the story is the Jewish Guild for the Blind. The opening anecdote describes how a meagerly-paid music therapist who worked there 20 years was fired, and she is in despair of the impact on her charges, who are elderly, poor,and have little else in the way of enrichment. The ostensible reason for the cut was that the Guild had a bad year in 2009. But its CEO, Alan Morse, saw his pay increase 82%, from $844,000 to over $1.5 million.
And it’s not as there is a ready justification for either the pay level or the increase. The Guild’s main source of revenue is Medicare. It was closing an operation in Yonkers because it was “unprofitable” at a time when employees were raising questions about the use of funds:
In a September 2011 article, the New York Daily News reported that “Michael Henderson, who once oversaw the guild’s procurement, claimed he was fired in 2009 after complaining about irregularities. Henderson said the guild spent $100,000 on imported furniture for Morse’s part-time White Plains office and he claimed another officer pocketed $100,000 from the sale of guild property.”
Management told staffers that the Daily News misrepresented Morse’s pay, and the increase was due largely to an increase in his retirement pay. Funny, that, since employee pension funds were frozen before that grant was made. And this little sweetener can’t be justified by Morse’s fundraising, since it lost money after expenses in the preceding period.
Morse isn’t alone. Huffington Post points out that there are other not-for-profits that are hardly deserving of the name, for instance, lobbying groups. The head of the Chamber of Commerce earned $4.7 million in 2010, and the head of the American Petroleum Institute made $6.4 million. that year. The Village Voice story lists other examples: the pastor of the Riverside Church in Manhattan, who made $600,000 in 2009; the head of Homes for the Homeless, whose funding comes almost entirely from government grants, earned over $460,000. (The article usefully debunks the rationalizations for lofty pay in the not-for-profit sector).
Reader bob supplied yet another egregious example: the “not for profit” Excellus BlueCross BlueShield, which reported $223 million of profit for 2011 and tripled the pay of its departing CEO to $5.2 million.
There’s a simple way to stop this feather-bedding. Implement Doug Smith’s maximum wage. Limit the pay of senior executives at nonprofits to no more than 25 times that of their lowest paid worker. Contractors that work on a full time or consistent part-time basis are to have their pay normalized to full time equivalents and be included in determining who the lowest paid workers are. It’s also time that people who donate to various causes look at the pay of the top executives to make sure their contributions really are going to the highest and best use.