Proposed Charity-Compensation and Governance Amendments Put on Hold

October 02, 2009

Proposed Charity-Compensation and Governance Amendments Put on Hold

Sen. Charles E. Grassley, the senior Republican on the Senate Finance Committee, did not pursue votes on two amendments that he proposed to the committee’s health-care bill affecting executive compensation and governance at charities.

But he inserted comments on them into the record and reserves the right to propose the language later, either as part of the health-care bill or to another piece of legislation, said Jill Gerber, his press secretary.

The finance committee completed work early this morning on amendments to the bill drafted by Sen. Max Baucus, the Montana Democrat who chairs the committee, and is expected to take a final vote next week.

Sen. Grassley, Republican of Iowa, proposed eliminating a “safe harbor” provision in IRS rules that allows executive compensation at charities to be deemed reasonable if the group follows certain steps. It would also require certain charities to disclose what type of comparable data they used to determine compensation for their executives.

The senator also proposed an amendment to clarify that the IRS has the right to ask questions about governance and management practices on the revised Form 990 informational tax return.

In his remarks for the record, Mr. Grassley noted that many of the highest-paid nonprofit executives are at hospitals. He referred to The Chronicle of Philanthropy‘s new survey of compensation of chief executives at big foundations and charities, which found that the biggest earner among the groups reviewed was at Partners HealthCare System, in Boston.

— Suzanne Perry

Comments

As I see it, these two amendments would have two distinct outcomes: one would regulate NPO compensation itself, the other would require more transparency from NPOs with respect to how executive compensation is set. The first clearly oversteps Congressional authority over NPOs; the second does not and I support it. No organization should oppose laws that enforce transparency provided sharing the information is not an undue burden on the organization.

But it bothers me immensely that Sen. Grassley would oppose the safe harbor provisions on the grounds that compliance is so high as to make restrictions on nonprofit salaries impossible to achieve. That was not the intent of the safe harbor provisions. The real issue with Sen. Grassley is that he just thinks NPO executive salaries are too darn high. Whether or not we had safe harbor provisions, he would still think so. The fact that most salaries really can be justified on the basis of market competition clearly doesn’t matter to him. It is disingenuous for him to claim otherwise.

— Beth Gazley, Indiana University Oct 5, 12:17 PM #

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