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.