A top senator’s scrutiny of the Boys & Girls Clubs of America is damaging the image of the nonprofit world and is a sign of an unfair expection that nonprofit leaders earn less than their for-profit peers, says a charity expert.
Dan Pallotta, author of Uncharitable, writes a scathing article about Sen. Charles Grassley, who is one of four senators asking the Boys & Girls Clubs to provide details about what it spends on executive compensation, lobbying, travel, and other items.
(Read The Chronicle’s article about the scrutiny and the charity’s response.)
On his Harvard Business Review blog, Mr. Pallotta says Mr. Grassley’s public questions about how much the charity’s chief executive earns are an “underserved attack” that has “created what will likely now be a 10-year uphill public-relations battle.”
He says that the Iowa Republican’s comments demonstrate a double standard between nonprofit and for-profit pay and a misunderstanding of how charities operate. Mr. Pallotta also knocks the news media, especially CNN’s Wolf Blitzer, for reporting the story without offering better context.
“The money paid to a valuable CEO is not money taken away from the cause. It’s an investment in the cause,” he writes. “How many clubs would have had to close if the organization had been without an effective CEO, or if it paid a person half as much and only got half as much productivity?”
He continues: “Senator Grassley has just dealt a sucker punch to the Boys & Girls Clubs, its CEO, and the millions of kids it helps every day in his own self-interest.”
What do you think? Click on the comment button to share your views.
0 Responses to Charity Expert Defends Boys & Girls Clubs in Pay Controversy
mpublow - March 16, 2010 at 5:41 pm
Not having read the entire HBR article, I can’t comment on how well Mr. Pallotta does or does not make his case. At face value, there are a number of legitimate questions that can and should be asked of any charity:1) How is the compensation of the CEO compared to the lowest paid staff member of the organization, and separately to the average salary paid to staff within an organization (easy to calculate if you know the number of FTE equivilent staff and the amount paid in salaries) What is the multiplier? Does that multiplier seem reasonable? 2) For a national nonprofit with local affiliates or members, what are the value-added services that it is providing to its local affiliates? This is reasonable since most national offices in essence “take credit” for the combined services and program outcomes generated by their local affiliates. An easy question to start doing due diligence in this arena is: What percent of funds raised by the national office are distributed to local affiliates?3) Based on the brief summary that appears in the COP, it is not clear that Mr. Pallotta understands the legitimate legislative or public policy issue that is generating this scrutiny. It would be one thing if BBBS were an nonprofit that existed based solely on private support. It is entirely another thing when a nonprofit such as BBBS actually has been receiving an annual, noncompetitive federal award of significant funding, and is seeking “reauthorization” of this funding to continue for another 5-10 years. It is reasonable in the for-profit world for individuals or groups holding large numbers of shares in an company to play a larger role in asking tough questions. Why is it unreasonable for Congress to do so, when they are the representatives of the taxpayers being asked to approve a continuation of federal largesse to one particular nonprofit.While the general argument that CEO pay can be viewed as an investment in the organization, it is also reasonable to filter that through the dual lenses of proportionality and performance. Is the pay proportional to that of other national nonprofit leaders in a similar “business” or with a similar program focus? Is the pay of the CEO being reasonable tied to expectations of performance for which the CEO is being held accountable?These are fair questions for either a Senator or a person-on-the-street to ask. To argue otherwise is to suggest that nonprofits are due a protection from public dialogue and accountability. Reasonable people may disagree, but reactionary dialogue on either side of an issue rarely results in a substantive engagement of the issues at hand.
jonigolden - March 16, 2010 at 9:36 pm
While I agree a top-level CEO deserves adequate compensation, it is also incumbent upon any organization that accepts federal funding to answer to governmental authority. Also, if Mr. Pallotta wants to justify non-profit CEO salaries by comparing them with the for-profit world, then he should not be complaining about the scrutiny and criticism. People in this country are holding a magnifying glass to disproportionately large executive salaries. B&GC should be no exception.
lindsayn - March 17, 2010 at 12:15 pm
I would be interested to see a more detailed breakdown of how her salary and benefits were allocated. Did any funds come from the government grants or were they pulled from the millions and millions she brought in in individual/foundation donations?Putting restrictions on compensating charitable leaders is one of the reasons the nonprofit world is struggling and suffering. We can’t recruit the top execs because they can just go work in the for-profit sector and make 5x as much and no one bats an eye. We can’t retain the top leaders for the same reason. How are we supposed to do great work and have the best leaders if the public and the government are tying our hands so we can’t compete?
cedwin - March 17, 2010 at 1:20 pm
I am not familiar with the quality of Boys & Girls Club leadership at the national level. However, locally the leadership has been questionable. Talented individuals have been terminated while ohers with questionable skills have been hired at higher salaries. Meanwhile, clubs in areas of great need have been closed.
dlhcme - March 17, 2010 at 2:34 pm
The breakdown according to a Washigton Post story is That includes a base salary of nearly $361,000, a $150,000 incentive and nearly $478,000 in benefits, expenses and contributions to a deferred retirement plan, a spokesman for the organization said in a written statement Friday. http://www.washingtonpost.com/wp-dyn/content/article/2010/03/12/AR2010031204061.html Keep in mind that there are 4000+ Boys and Girls Clubs in all 50 states, Puerto Rico and on military bases around the world. The President regularly visits many of those Clubs every year so it is logical that there would be considerable travel expense associated with her job. Their 990 form is available on their web site, along with other detail about the organization so I recommend that you get the facts. http://www.bgca.org/whoweare/facts.asp
wildwomanfundraising - March 17, 2010 at 5:36 pm
No person working at a charity is worth paying more than $200,000 per year. That’s just a simple fact.The people they hire should love the mission enough to not have a salary in such a huge range.More important though, and I don’t see anyone addressing this, isIs the fundraising revenue increasing dramatically under this CEO?Is turnover reduced under this CEO?Is the nonprofit helping more people more efficiently?Is this CEO able to cut costs and not lay people off and give people a living wage at the same time?Is this CEO able to motivate the board to give and do ever more?If the CEO is doing their best in all of these areas, then they deserve up to $200,000. But if they truly believe in the mission, then how much they are paid should not be a factor. Their job could easily be done by 10 nonprofit staff each working for a fraction of that salary. Leaderless organizations are the way of the future. http://www.wildwomanfundraising.com/fundraising-downturn-power-leaderless-organizations/http://wildwomanfundraising.com
jayfrost - March 18, 2010 at 9:19 am
I strongly encourage everyone to read Dan Pallotta’s complete article in Harvard Business Review. In it he makes a compelling case that the news media, always on the lookout for a “gotcha” moment, is hysterical, hypocritical and ill-informed in its judgements on nonprofit organizations. Nowhere is that so clear as in the discussion of NPO CEO compensation. In that context, Pallotta’s comparisons to private sector CEO compensation are entirely reasonable and illustrative. By treating NPOs and private sector companies so differently in their coverage, the media contributes to the false public perception of all nonprofits as volunteer run local charities raising money by pancake breakfasts and storefront bucket drives. As readers of the Chronicle know well, the third sector is large, dynamic, professional and a major contributor to both the public good and the economy as a whole. Pallotta has challenged us to see the nonprofit sector for what it is rather than undermining it by holding these critical societal contributors to financial standards which would inhibit their ability to serve.
lindsayn - March 18, 2010 at 1:37 pm
Wow, wildwomanfundraising. I love my job, I work very hard, and I am fully committed to my organization’s mission. I don’t think anyone (especially you, the IRS, the federal government, etc.) other than my bosses and the board of directors of my organization should be determining my salary and benefits, as they are the only ones who truly know my work, my worth, and my commitment. Salaries and benefits should be proportional to the quality and quantity of work done, years committed, and the budget of the organization, as with any other job. Work hard and get paid for it, regardless of sector.
submitarticle - March 19, 2010 at 3:31 am
While I agree a top-level CEO deserves adequate compensation, it is also incumbent upon any organization that accepts federal funding to answer to governmental authority. GoArticlesArticle DirectoryPogo GamesArticle Submit