In a post a couple of weeks ago, I attempted to shed some light on the then-breaking “scandal” regarding the compensation of Roxanne Spillett, President of Boys & Girls Clubs of America. I was glad that my post, which was intended by as an analytic and non-judgmental look at the numbers behind the controversy, was received that way by most (including Dan Pallotta, an outspoken advocate for higher nonprofit pay levels). Hopefully, the conversation will take an even more informed turn once the additional information requested from BGCA by Senator Grassley et al. is received and becomes public. (The Senators requested that the additional information be provided by Monday, March 29th. To this point, there have been no reports with regard to the receipt or content of that information.)
While we wait, I wanted to respond to a very good question that I received regarding my original post. This involves an important clarification to the comparisons I provided, but also points to just how muddy the waters around nonprofit executive compensation analyses can be.
How Big is BGCA?
In my post, I informally compared Ms. Spillett’s compensation with that of the heads of 11 organizations with 2008 income between $1 billion and $5 billion. This prompted a question from Fred Scaglione, Editor of the New York Nonprofit Press, who asked why I chose comparator organizations of that size, when BGCA’s revenues were less than $150 million.
The answer is one of just what revenues are being measured. As I pointed out to Mr. Scaglione, the source that I used to select comparator organizations was the Chronicle of Philanthropy’s annual Executive Compensation Survey. That survey in turn categorizes organizations on the basis of organizational income as reported in the Chronicle’s annual “Philanthropy 400“, which details the American charities which raise the most money from private sources. In those surveys, BGCA’s total organization income for 2008 is reported as $1.3 billion, with $672 million of that coming from private sources (placing it 17th in the most recent Chronicle 400). However, those figures include support received not only by the national office, but by the organization’s more than 4,000 affiliated clubs as well.
When we take a look at the organization’s 2008 Form 990, the national organization’s gross receipts are $148 million, much smaller than the total income reported in the Chronicle. This figure is corroborated by the organization’s most recent annual report and consolidated financial statements.
This raises an interesting question, and points to a glaring ambiguity in the process of determining “like” organizations for the purpose of compensation comparisons. On one hand, given the relatively autonomous nature of the affiliated clubs, and the fact that nearly 90% of the total income was raised outside of the national organization, it does not necessarily seem reasonable to consider Ms. Spillett the head of a $1.3 billion organization and to compare her compensation on that basis. On the other hand, as Mr. Scaglione points out, the national organization does provide essential marketing, communication, and other services, as well as policy and programmatic guidance, so it would seem unreasonable to completely discount the affiliate operations and consider only the size of the national organization.
Show Me the Money?
Let’s take a look back at the comparisons I offered. Among the 12 organizations I included in my review, I indicated that Ms. Spillett’s total compensation was third highest, while the organization’s income was mid-pack (ranking 6th, to be exact). So what happens if we look just at gross annual receipts as reported on each organization’s 990? In the majority of the cases, the number is about the same either way we look at it. But for three organizations besides BGCA (United Way Worldwide, Goodwill Industries International, and Salvation Army), the national organization’s gross receipts are much smaller than the total organization income. So if we look solely at the national organization’s receipts, BGCA ranks 8th. This does not markedly change the original comparison.
For BGCA and the other 11 organizations included in my comparison, the following table details the total organization income (as reported by the Chronicle), the gross receipts of the national organization (from 2008 Form 990s), and the 2008 cash compensation and total compensation for the organization’s top executive. (For each statistic, the organization’s rank among the 12 is given in parentheses.)
It is reasonable to guess that if we were to completely disregard the affiliate income and compare Ms. Spillett’s compensation solely to that of nonprofit organizations with gross receipts of approximately $150 million, both her cash and total compensation would appear to be relatively high in comparison.
One analyst, Linda Lampkin, research director for the Economic Research Institute in Washington, DC, has taken a stand regarding Ms. Spillett’s compensation, suggesting that “she’s certainly at the very high end, if you average everybody at that level”. According to an article in the Pittsburgh Tribune-Review, Ms. Lampkin indicates that Ms. Spillett “should” receive total compensation between $282,000 and $433,000, depending on whether affiliate revenue is included.
To provide an additional frame of reference, I’ve taken a look at the compensation for top officials of the 10 nonprofits categorized as youth organizations in the Chronicle compensation survey. Among this group, BGCA is either first or fifth largest, depending on the income measure used, and Ms. Spillett’s 2008 cash and total compensation both rank second among the cohort. This 2008 data for this group of organizations is detailed in the following table.
So What’s the Answer?
In the words of one commentator, Pamela Grow of Pamela’s Grantwriting Blog, “it depends”. What is most clear is the ambiguity and challenge of applying the IRS’ standard that reasonable compensation is determined by comparisons with “similarly situated” organizations.
I eagerly await release of the additional information that has been requested and the next developments in this case. My hope is that shedding additional light on the nature and detail of the numbers behind stories such as this can help elevate the discussion of nonprofit compensation beyond emotion and politics and to a place that best serves the needs — and the beneficiaries — of the sector.
In the meantime, what do you think? Has the information you’ve seen so far influenced your opinion about the BGCA case in particular, or nonprofit executive compensation overall? Or has it just created more questions?
Photo credits: edinburghcityofprint 
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