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August 20th, 2011 - Non-profits who kill for more profit

ceo1 250x171 Non profits who kill for more profitRunning a non-profit organization and going on a blind-date is not all that different – in both you never know where you are going to end up; home with a bottle of cheap whisky alone, or in bed with a big titted blond. The non-profit sector has become every bit as greedy as the for-profit sector, and in some cases, it has surpassed the latter. In today’s market, the administrative cost and executive compensations have become a direct derivative of the organization’s net income. The more the organization receives, the higher the salary of its executives will be. A 10 million dollar corporation will have a surplus of 1.5 to 3 million dollars to candy out to its executives and other expenditures.

As in the for-profit sector and specially the financial sector, the non-profit laws had been wacked to pieces to insure that top players can enjoy their private jets and multi-million dollars homes in the Caribbean. The IRS has a laughable term describing the circumstance which gives the green light to this shameful money sacking: “Reasonable Compensation.” Reasonable compensation is defined as “the value that would ordinarily be paid for like services by like enterprises [for-profit] under like circumstances.”

Going by this vague standard, the 2.5 million dollar salary of William Barram of the American Cancer Society, or the 1 Million dollar salary of Gail McGovern of the American Red Cross is rightly justified, because the net income of their respective organizations is comparable with the for-profit enterprises of their class. And when watchdog groups disclose these numbers with public and a few souls raise their concerns, the kind of Miss Betsy Brill, publish defensive articles in nation’s economic papers like Forbes to tone down the criticisms. In her article for Forbes Magazine, titled Nonprofit CEOs Are Worth Every Dime”, Miss Brill goes on and on to why these thieves are entitled to public donations that were intended for a different purpose than buying another Rolls-Royce:

“…critics may cause donors to question–or even to pull back–their charitable giving at a time when nonprofits are struggling to meet an increased demand for services in the face of government cutbacks and dwindling private support.”

What did she just say? “At a time when nonprofits are struggling?” Miss Brill never explains why the “struggling organization” is paying a man a seven figure salary if it is indeed struggling. But she is quick to add: “Keep in mind that the highest paid CEOs are overseeing complex multimillion-dollar ventures.” Does she have alternative motives? You bet.

For many years prior to the market collapse of 2008, over-fed, over-paid, white-color financial analysts told us the very same thing, “AIG is doing wonderful, Lehman Brothers is at the top of its game. Don’t fear, invest, buy this, give them your money…” And when the economy collapsed and 700 billion dollars came out of the taxpayers’ pockets to bail out these criminals, these very same analysts justified their deceptiveness by saying that what they said was “just an opinion”. They got paid to put AAA ratings on worthless Collateralized Debt Obligations (CDO) and investors bought these high risk worthless pieces of shits because credit rating agency’s like Moody’s and Fitch endorsed them and backed out later. Miss Brill doesn’t work for a Credit Rating Agency, she owns a counterpart of it in the non-profit sector. She is the President of Strategic Philanthropy, Ltd., a philanthropic advisory firm in Chicago. Same shit, different name.

salaries Non profits who kill for more profit

The non-profit entities are not that different from for-profits either. Where there is money there will be always greed. Where there is money there will be also power, and mankind is prone to abuse both. In for-profit corporations, the share holders and investors question the executives on how their money is being played, but in non-profit world, the faith of the donors are in hands of a few volunteers and more often than not, the organization’s CEO holds a dictatorial power over the governing body. It is irrelevant that the board has the power to hire and fire the CEO, the CEO in a non-profit organization is nevertheless the dictator and the law maker of the organization with only the IRS to answer to. And the IRS position is already clear: “reasonable compensation.”

The only difference is that when a for-profit corporation goes bankrupt, shareholders and investors lose money and their outcry makes the evening news, but when a non-profit organization goes under, there is no one to take the hit. Donors give less than a shit – hey, they gave the money away in the first place – and in most cases they don’t even want to know where their money goes as long as the organization has a picture of a skinny black baby or a woman with one breast cutoff on the header of their website. The real victims are the poor, the class that was supposed to be served, but they have no voice. Their voice, if any, gets lost in the roar of the private jet engines and sport cars of the thieves who stole their money in the name of making a difference.

We are being told on an alarmingly increasing rate, that being non-profit doesn’t mean not making a profit. More and more non-profits are running mafia-style businesses as they hire and compensate their own relatives inside the organization with many six figure incomes. Then the seven figure elite supporters come in and tell us that only those making these ungodly sums have the intellect and capability to pull off the operations in these large entities. But, long ago, before there were these salaries, people did just that and the poor received the majority. Imagine that.

mafia Non profits who kill for more profit

It’s not the legality of these gruesome compensations that is the issue; it’s the morality of the whole business. I founded a non-profit organization because I was compelled to help people and I surrounded myself with those who had the same inkling. Do I have the power to abuse them? Absolutely. But at the end of the day I know, what I take is what could have put a smile on a child’s face. To me that’s the drive not the salary. Maybe I’m radical but I do see the struggle of the poor first-handed on daily basis.

I leave you with one question: is the job of managing a charity really more “complex” than running a 300 million population country? If not, how do you justify salaries as large as six times of the US President? Don’t we have any talented people willing to manage charities in the same unselfish spirit as their donors? If not, we should outsource these jobs too China too, they sure as hell will do a better job it for a much lower wage.

There are 5 Comments

  1. August 21, 2011 at 7:59 am

    Another great piece Christopher,

    It’s disturbing to know that the people at the top of these organizations make that kind of money. Makes me wonder about my many years of donations to WWF…

    Raf

  2. Chris Sorbi
    August 24, 2011 at 10:15 am

    Raf,

    I’m glad you enjoyed but keep in mind not all are like that. Majority are good but these guys make everyone look bad.

  3. February 12, 2012 at 6:51 pm

    I’m of two minds about compensation. First, I think that to have a thriving organization you need experienced leadership, and that costs money, particularly if they come from the private sector. That makes the argument for allowing higher salaries for large non profits. However, that said, the whole point of a nonprofit ORGANIZATION is that it is a GROUP of people dedicated to performing a service. Therefore I don’t believe the CEO should be paid imminently MORE THAN the staffers who actually make sure the organization is running smoothly on a day-to-day basis. Higher level management is after all just the organizing force of a company. For example, my job as CEO is to bring all the qualified dedicated people together to make decisions. I provide leadership by moderating discussions. Of course, I hold the ‘tie breaker’ vote but my responsibility is to higher good people and then listen to their recommendations. I don’t see my salary as being that much higher than the people I work WITH. We are a team. And although compensation is about the amount and level of responsibility, it’s difficult to think I am more important that the man who runs our whole website, or the accountant who keeps us above water financially, or the social media manager who helps us get out to our audience. Do you see? I see management structure as a Round Table – not a hierarchy.

  4. February 12, 2012 at 6:52 pm

    oops typo … that was hire not higher :-)

  5. Andrew
    March 9, 2012 at 11:51 pm

    What is your source for the salaries you posted?

    I looked up Gail McGovern in the IRS Form 990 (available publically online), and the figure you show agrees to the very dollar with form 990 ($1,032,022)

    However, for Harold Varmus, IRS Form 990 for Memorial Sloan-Kettering Cancer Center reports $1,338,047:

    Base Compensation: $715,530
    Bonus and Incentive: $445,600
    Other Comp…ensation: $102,732
    Deferred Compensation: $71,553
    Nontaxable Benefits: $2,632
    Total: $1,338,047

    Where did you get the $2,557,403 figure from?

    Thank you

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