Patricia Nell Warren

Overpaid CEOs: What Other Rich People Are Robbing the Rest of Us?

Filed By Patricia Nell Warren | February 04, 2009 12:30 PM | comments

Filed in: Living, Living, Politics
Tags: looting pensions, overpaid AIDS executives, overpaid football coaches, Pangaea Global AIDS Foundation, San Francisco AIDS Foundation

Americans are loving it as President Obama vents at the CEOs who paid themselves bonuses out of bailout funds. People cheered when Missouri Senator Claire McCaskill made her historic speech demanding that CEOs "shouldn't get paid more than the President of the United States gets paid." The rising fury targets a handful of greedy execs who take a huge piece of the pie even as that pie is shrinking.

But... why stop at greedy CEOs of a few big corporations?

For many years now, out-of-control salaries, bonuses, benefits and perks have been festering at the top in other areas of the U.S. workplace. Indeed, these pernicious practices are found in the nonprofit sector too, and result in growing social ills. They have even been reported in the media for years. Yet few Americans have paid any serious attention....till now.

In the LGBT community, many have been oblivious to nonprofit abuses right in our own backyard.


Other Areas of Pay Abuses

Pay problems definitely fester in the pension-fund world, and are exacerbated by the Wall Street collapse. Many Americans, including LGBT people, are worried about collapse of their pension funds. In 1990, the U.S. had 900,000 pension funds, which held around a trillion dollars in trust for millions of workers. Time was, that looting pension funds was more typically done by the Mafia. But today it's a different story, as funds are widely damaged by mismanagement and greed of the firms managing them.

Seven years ago, for example, school employees in Pennsylvania learned that their pension fund was being looted by overpaid executives. Central Penn Business Journal reported that the Pennsylvania pension fund for retired school employees was paying 22% more in bonuses that year -- almost $300,000 to investment staff -- at a time when the fund's assets had dropped in value. The Journal said, "The bonuses came as market losses forced school districts and the state to make higher payments into the pension fund."

Meanwhile, aerospace giant Boeing was having the pension-fund battle from hell. Each year, as a government contractor, the company was supposed to put $2+ billion into its pension fund. But around 1997, according to Capital Flow Analysis online, Boeing started falling behind on its pension duties. By December 2000, the plan was short by $7.1 billion. So Boeing appealed to the Pentagon for a bailout,

After the feds obligingly gave Boeing a lucrative new contract, the company caught up on its pension funding. But now Boeing wanted to shed the traditional-type cost-heavy (for them) pension plan, in favor of one with a 401(k) twist, that would shift the financial burden to employees. By mid-2008 Boeing was locked in deadly conflict with unions over this and other issues. The unions rejected Boeing's pension proposal, and the ensuing strike crippled production for a while.

The Boeing story makes a pretty clear point. Through it all -- judging by the labor comments I've read online -- rank-and-file employees were disgusted that their welfare was being impacted by Boeing's overkill on executive pay. For instance, in 2003, CEO Philip Condit was compensated more than $3,300,000.

Another festering area is in the top echelons of higher education. The salaries of football coaches, for example. Football has always wagged the dog when it comes to college sports. But in recent years, as colleges and universities struggle with rising costs and declining endowments, some pay priorities have veered out of control. Even as young people are forced to get big student loans and pay soaring tuitions, the top football coaches are now being paid some astounding salaries.

The other day, an Oklahoma friend of mine was complaining bitterly about the reputed multi-millions in total compensation being shoveled to the football coach at the University of Oklahoma. "And meantime," he said, "the school is so strapped that it's charging a whole lot of new fees rather than raise tuition."

Already in 2007, USA Today reported that some football coaches were hitting the $3-million mark in salary alone. Among these 3-million-dollar babies was the Sooner coach. And that figure doesn't include bonuses and perks, namely subsidized housing, cars, a percentage of ticket sales and other benefits. So a coach's total compensation package could be $4 million or more. Fact is, a top school-football coach can buy and sell the CEO of Boeing. But few Americans have complained.

Supporters of the practice insist that winning coaches bring economic benefits to their schools. Yet it's clear, from the balance sheet, that whatever they bring is not enough to offset the deadly financial drains on these schools and their students. Recently, as the University of Washington was looking for a new multi-million coach , Seattle PI reported, "The university's endowment declined 14 percent to $1.9 billion for the year ending in September. Add to that the fact the state is considering a rollback of up to 20 percent to higher education, and layoffs. A hiring freeze and deep budget cuts all over campus are in the works."

It doesn't make sense, right? But we Americans have put up with it. And now it's coming back to bite our butts.

Abuses Among AIDS Executives

Out-of-control pay packages can be found in the nonprofit world too. We LGBT people can look close to home for one of the smelliest nonprofit compensation scandals. It smells to high heaven precisely because the AIDS movement has positioned itself as the ultimate noble cause.

It's true that top AIDS-org compensations don't reach the astronomical sums paid out by a multinational like Boeing, or even a university with a gilt-edge football program. But the annual cash flow of a typical nonprofit is also much smaller -- in the millions, instead of trillions, with a top-level salary in six figures instead of seven. Yet the problem is still the same -- pay for a top few that siphons away a disproportionate percentage of that institution's annual budget.

There are industry standards for how nonprofits should spend their money, since they supposedly have to be accountable to the private donors and government funders that keep them afloat. Typically at least 60 percent of the budget should go to the stated cause, with 40 percent going to management and fundraising. A Seattle Times expose cautioned, "A salary greater than 10 percent of total revenue should prompt questions."

Yet the salary of an AIDS-org director can suck significantly more than 10 percent out of the budget. Some directors have sought pay raises even as Ryan White funding was being slashed, as donations were falling off, and the nonprofit was cutting vital services or programs that directly benefit people with HIV and AIDS.

This pay habit of some AIDS orgs isn't exactly a secret. Their tax reports are on public record. Dollars-and-cents exposes on specific salary abuses have been reported in the media for years. Some notable gay AIDS activists have posted their own public complaints, including Puerto Rican activist Jose Colon and San Francisco accountability advocate Patrick Monette-Shaw.

One AIDS exec whose salary became a lightning rod for controversy was Pat Christen, director of the San Francisco AIDS Foundation for 18 years. By 1999 there were already scattered calls for her resignation. Yet in 2000 she made $207,000 plus benefits, according to tax returns. This at a time when the AIDS Foundation's intake was sharply down. Christen tried to blame the deficit on the economy. But astute observers weren't buying it.

"You'd think they would see the writing on the wall and freeze their salaries," said Jim Illig, director of government relations at Project Open Hand.

By 2002, local publications, including the Bay Times and the Bay Area Reporter, were all over Christen. The San Francisco Examiner pointed out that she was paid more than the city's mayor and police chief. Patrick Monette-Shaw's website The Last Watch details the sordid saga of Christen's compensation, and the firestorm of controversy around it in San Francisco. Finally in 2002. with a big budget shortfall looming, Christen was compelled to take a 12-percent pay cut, and to slash salaries of some other top people. She finally resigned in 2004, citing personal reasons.

Today, as I write this, the new lightning rod is Eric Goosby, director of the San Francisco AIDS Foundation's overseas arm, the Pangaea Global AIDS Foundation. President Obama is considering Goosby for the position of U.S. AIDS czar. Yet Goosby is an example of overstuffed AIDS pay.

The other day, gay pundit/activist Mike Petrelis looked at IRS tax reports from Pangaea and shared the figures in his blog. He wrote: "From 2004 through 2007, revenue fell a whopping 68%. [Goosby's] compensation went from $248,935 up to $284,775. Translation? As funds dried up to provide services and life-extending drugs to poor people abroad with HIV, Goosby didn't diminish his salary."

According to Petrelis, 2007 tax reports indicated that Goosby's salary ate 15% of that year's $1.9 million budget at Pangaea.

Defenders of these financial practices insist that a good AIDS exec is worth every penny. Indeed, the AIDS establishment has tried to make it politically incorrect to attack these bloated pay packages. But whether these top people are doing a good job or not, I don't see how paying them such a hefty percentage of an organization's intake can be justified on ethical grounds. Especially when programs affecting human life and welfare have to be axed in order to give them that big paycheck and all the extras.

To their credit, some of the smaller AIDS nonprofits have cut salaries, including Project Open Hand. But these admirable efforts hardly compensate for the diversion into executive pockets of countless millions of additional dollars that should have been available -- going by the canons of AIDS rhetoric -- for research, as well as treatment and housing for people who can't afford it..

It doesn't make sense, right? But many of us LGBT people have put up with it -- all the while saying that "we must fight AIDS."

With a new Democratic administration in D.C., AIDS meetings are happening around the country, and we're hearing the usual trumpet calls to do better -- to fight harder, spend more, and show more success, especially with HIV prevention. But the AIDS establishment will continue to have little credibility if they don't put a stop to this hemorrhaging of vital funds at the top.

Yet AIDS nonprofits are not the only offenders here. On other areas of U.S. philanthrophy, scandals about pay have hit the news. An overview article in BNET online indicates that the problem may be fairly widespread.


Solutions Are Desperately Needed

What could be done about what is clearly a deeply entrenched national vice?

First of all, Congress should have the courage to investigate. I realize that Congress has a lot on its plate right now. But I'll betcha that if the House Finance Committee sits down with an adding machine and a big pile of IRS tax reports, and starts totting up all the examples of executive overpay that have already made news across the country, in both the for-profit and non-profit entities, the grand total of billions made unavailable to human need because of sheer greed might equal the $800-billion TARP bailout.

Solutions? Senator McCaskill's suggestion that no CEO should be paid more than the President's $400,000 a year is a good start, when it comes to execs in 7-figure salary brackets. As I write this, President Obama is proposing a $500,000-a-year cap on executive pay for any corporation getting government help.

But what about execs who get less than $500,000 even when grossly overpaid? Such as the nonprofits I mentioned? Nonprofits get government help too, in the form of direct Congressional funding. It isn't right that a six-figure compensation should take a larger-than-ethical bite out of an institution's budget, whan that budget is getting infusions of taxpayer money.

Perhaps a formula should be created, and written into laws that regulate nonprofits. This would compel the offending pay packages to be downsized and put into an equitable balance with the annual intake of a given institution. Executive pay should also be adjusted annually, going up and down as the nonprofit's intake fluctuates. That seems only fair to the many millions of needy people around the U.S. and the world who are supposedly the reason why these nonprofits exist.

Is this the moment when public outrage will finally get hot enough for something to be done? Are we going to clean up every corner of American business and philanthropic endeavor where top people get to loot the financial resources of these institutions that they're supposedly lead? I'm not holding my breath.

But there is no excuse for tolerating this institutionalized larceny -- for robbing the poor and giving it to the rich -- at a time when so many people are in need.


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John R. Selig | February 4, 2009 7:53 PM

Patricia,

This is an excellent post. How interest that there are no comments on it. Are readers only interested only in topics that are 100% LGBT focused? If so that is very sad. The happenings in the macrosphere often impact us in the LGBT community just as much as LGBT specific news.

We should be just as angry at obscene pay for executives of HIV organizations and the mainstream community (including us as well) are at overpaid executive on Wall Street.

The current economic crisis, which was totally avoidable, was the result of greed. Un fortunately greed crosses all sexual orientations and gender identities!

Very good post. Highly informative and thought provoking and maybe even provoking in general.

Nerissa Belcher | February 4, 2009 10:04 PM

A few years ago I interviewed for jobs at various AIDs support non-profits in Atlanta. I got the impression that things were not kosher. For example, one large agency, didn't have a secretary despite a large budget. There was no easy way for clients to arrange for care. Another organization appeared to be claiming to spend money on non-existent employees. Another organization did not have hours posted nor was it often open for clients yet sponsored parties and other social affairs. Another organization spent large amounts of money to send senior executives on out of area "training" courses yet had almost no services for HIV clients other than to tell them to apply for help elsewhere.

Nerissa, I am not surprised to hear your story, and have observed similar things about some AIDS organizations. It's sad that some of our people have seen AIDS as an opportunity for personal enrichment rather than the opportunity to help others.

Fortunately there are some organizations that are NOT run in a corrupt manner.

Patricia,

The top U.S. Officials do not make as much as Goosby. What an outrage that non-profits, not-for-profits and football coaches make obscene amount of money!

For comparison, here are some examples of the top U.S. Federal Officials' salaries for 2009: Speaker of the House $223,500 Majority and minority leaders of both chambers and Senate president pro temporare $193,400 Senators and Representatives $174,000 Chief Justice of the Supreme Court $217,400 Associate Justices $208,100 US Courts of Appeals judges $179,500 Federal District judges $169,300
President of the U.S. $400,000 Vice President $227,300 Cabinet Officers $193,400

So, any solutions? I am a volunteer and I get no pay. What happens when we lose confidence in every organization and institution? Obama offers hope, but it seems nearly impossible for his Administration to turn this mess around, but we can and do hope.

I agree that it's a big task, but hopefully we can get the job done.

Today I noticed that much comment on the media focused on the demise of Reaganomics (meaning deregulation) and the start of a new era of regulation. I'm not somebody who favors "more government," but unfortunately the era of deregulation proved that business can't be trusted to regulate itself.

Some Republican commentators were complaining that Obama's new rule about salary caps is a "move towards socialism." Well, we have a minimum wage law...why not a maximum wage law? Salary laws had to come into existence, because some businesspeople are too greedy and hardhearted to do the right thing.

WOW Patricia, this is a sobering article. Makes you think about how deep the compassion of some goes or what goes into their pockets...scary.

There is simply no way that these folks' skill and work is commensurate with the amounts that they're being paid, which comes from the source of what's wrong with America's corporate culture.

We ought to move the top tax bracket up to the level it was at during the Nixon, or, dare I say, the Eisenhower years. Eliminate some of the grossest taxation exemptions and at least we'd be getting our fair share of that money in the same way that the government gets its fair share of money off the middle class.

Thanks for putting this article together, Patricia. We need to be talking about this - the idea that people's pay is completely private and an impolite subject is the exact reason why these folks get away with what they do.

Your mention of the "privacy" of pay made me smile, remembering my shock at discovering how Europeans are more open about salary matters. When I lived in Spain in the 1960s, I found that Spanish people would ask you, "How much do you make?" without batting an eye. They'd do this in the first 15 minutes of getting to know you.

You're probably right that this is an aspect of "the overpaid exec problem." If pay is "private," then nobody else has any "right" to criticize you about what you make.

Robert Ganshorn Robert Ganshorn | February 5, 2009 10:58 AM

Patricia, I experienced the same BS at Purdue and I developed an early distaste for college sports. No one talks about the Oxford soccer team :)

Part of the problem is the polite acceptance of the assumption that those who make larger amounts of money are in some way "the smartest people in the room" rather than advanced Dale Carnegie graduates.

Their justifications to themselves are that "everyone is doing it" so I am worth what they are worth." For them fund raising is only a business and an excuse for donors to go to a nice party, walk out with a gift bag of donated swag, have a silent auction and feel as though you have helped "those poor people." They have not particularly helped anyone. I retired my evening clothes about 15 years ago when I could no longer stand the "donors" preening about and the frantic organizers who had memorized every deep money pocketed face.

I felt sponsoring Little League was much more rewarding because street kids learned to become a team. Sixty percent of our kids went on to college from a poor neighborhood. That was special, but they were special.

Why should the CEO's get any compensation for bringing on the economic meltdown ? O'Neal at Merrill/Lynch who packaged sub prime mortgage dirivitives and sold them around the world got a huge severance pay.
President Obama said
"As part of the reforms we are announcing today, top executives at firms receiving extraordinary help from U.S. taxpayers will have their compensation capped at $500,000 – a fraction of the salaries that have been reported recently. And if these executives receive any additional compensation, it will come in the form of stock that can't be paid up until taxpayers are paid back for their assistance." Stick pins in the tires of their Bentleys.

jewish Banker | September 29, 2009 2:25 AM

in USA media and Internet Jewish lobby is the only Holy Cow that no media can critisize or even talk about,

hell they can make fun of prophets, God, every but not Jewish Lobby, why not....


i think that has little more to do about their manipulation than Mother Teresa like jews trying to earn a living