Thursday, April 02, 2009

Executive pay cuts: A tale of two sectors

Unless you're getting cozy under that rock, you've heard that private holding company AIG received $182 billion in federal aid last month, only to turn around and deliver $165 million in bonuses to its executives.

Now compare that to this story in the Washington Blade that reviewed the salaries of nonprofit executives at GLBT orgs (emphasis is mine):
In submitting their information for the Blade’s survey, at least seven of the 30 organizations indicated that their executive directors had or would soon take a reduction in salary in 2009 due to problems associated with the nation’s economic downturn.

HRC’s [Joe] Solmonese took a voluntary pay cut of 10 percent, lowering his total compensation from $338,400 to $302,200, according to HRC.

Neil Giuliano, executive director of GLAAD, agreed to a $20,000 salary cut in 2009, from $271,034 in 2008 to $251,034, Giuliano told the Blade. He also declined health insurance benefits from the organization. [...]

National Youth Advocacy Coalition disclosed in its survey response that the current 2009 salary of its executive director, Greg Varnum, was $62,000, a reduction from the 2007 salary of his predecessor, which was $92,240.
Now, I recognize it's only 7 orgs out of 30. And GLBT issues represent only one segment of the nonprofit sector. Still, let's consider the greater imbalance these stories represent.

Nonprofit executive compensation already trails for-profit executive compensation. It comes with the territory when you're bootstrapping operations at a donor-supported 501(c)3 so you can help save children, protect women, reverse climate change, etc.

Yet as the economy worsens, what do these nonprofit leaders do? Instead of running for bailout money, they look to themselves and reduce the most personal overhead: their own compensation. Now, I'm not suggesting canonization here, but I admire the gesture, appreciate the symbolism, and abhor anew the fact that AIG execs acted in such greed.

Of course, this leads to bigger discussions about what value we place on which job sectors in our economy, what constitutes fair market value for any executive, and how organizations can creatively ride out the recession without stiffing their staffers ... none of which we'll talk about right now, for fear of writing a novel instead of a blog post.

But we will talk about them soon, I promise, so in the meantime, let me know your thoughts and impressions here about executive pay.

Oh, and just so you know ... I receive $0 in compensation for my role as Blogger-in-Chief at Italian Mother Syndrome. ;)

Photo by woodysworld1778


  1. Anonymous8:02 PM

    I personally don't have that much of a problem with it. The amount that they paid out in bonuses is a fraction of the federal aid. Also, it is tough being an exec. It probably sucks. I can't imagine dealing with all of the pressure from within the organization as well as from the outside with shareholders and analysts. You would definitely have to pay me that much money in order for me to even consider doing that job. If the job didn't pay that much, I doubt many qualified people would step up to the plate to do it.

  2. Well, the AIG execs don't strike me as particularly qualified and competent. An article I was reading in Forbes summed it up well:

    "Should those AIG execs have received $165 billion in bonuses for creating the securities that helped bring the world's economy to the brink of collapse--all after the company took more than $100 billion in Federal bailout dollars? Of course not."

    I do agree that being an exec is tough. But that's true of pretty much *every* executive position. Executives at nonprofits have to answer to just as many constituents -- boards, funders/donors, volunteers, etc. -- plus fuzzier bottom lines, yet don't have the carrot of bonuses and payouts at the end.

    Like I said at the end of the post, this gets to much broader questions about fair compensation across the board. Any readers in high leadership positions out there who care to comment?

  3. Anonymous10:21 AM

    I agree that those in nonprofit do not get nearly enough. And it's not fair that people just say it is that way because it's the nature of nonprofit. Another case where nice guys finish last. :-(