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Nonprofit vendor salaries drawing increased attention

July 11, 2011 1 comment

Organizations such as the Massachusetts Providers Council may still be defensive  about suggestions that scrutiny be applied to the sometimes excessive salaries drawn by executives of human service providers in Massachusetts and elsewhere.

But it’s becoming clear in the wake of the fallout over the recent  $4.2 million severance package for a Blue Cross Blue Shield CEO and a number of other similar cases, that even in the nonprofit community, responsible voices are beginning to be raised urging serious consideration of the appropriateness of executive pay levels.

Here’s Ruth McCambridge, editor in chief of the influential Nonprofit Quarterly, discussing in an email to subscribers the Blue Cross severance package to former CEO Clive Killingsworth:

 This case is a poster child for why the public does not trust our considerations of pay levels. While most of us are, of course, well within or below reasonable limits for pay, there are these high fliers among us, and in this case the money that Killingsworth walked away with came very directly from millions of families’ pockets, some of whom are legitimately concerned about such stuff as getting by from day to day.

Meanwhile, in an interview  with the Nonprofit Quarterly last week, Paul Light of the Wagner School of Public Service at New York University, had this to say: 

I think the nonprofit sector has an obligation to get the very best talent it can at the most reasonable cost appropriate to its role in the public service—more broadly defined. Yet you can’t simply say, “We’ve got to pay whatever the market demands, and that’s the only criteria we can use.”…

I don’t think you have to take that vow of poverty, but at the same time I wonder if the sector is obligated to set itself out there as being more a part of the community that it serves—obligated by basic issues of fairness to set reasonable market-sensitive pay, but also stay in touch with the world we serve.

Here in Massachusetts, State Senator Mark Montigny of New Bedford came closer this year than ever before in gaining passage of proposed legislation that would limit pay for both nonprofit executives and board members to $500,000 (a pretty generous threshold in our view, particularly for board members).  Versons of Montigny’s measure passed the House and Senate in the form of budget amendments last month, but the measure was ultimately knocked out of the budget conference committee.    However, the measure is still alive in the form of a bill before the Judiciary Committee, but has not yet been scheduled for a hearing.

Montigny’s bill is supported by Attorney General Martha Coakley, who has been investigating compensation of nonprofit board members, and found that several health insurers were paying tens of thousands of dollars to their trustees annually.  Coakley’s spokesman, Brad Puffer, told The Globe last month that Coakley and her staff are concerned about situations in which “board members of any charity (nonprofit) are paid.”

Massachusetts already limits the amount of state funds that can be earmarked to pay for nonprofit salaries to $143,900.  COFAR has reported that in a number of cases, state and federal records regarding salaries subject to that compensation limit don’t match each other.

Meanwhile, Coakley, along with Massachusetts State Auditor Suzanne Bump and Inspector General Gregory Sullivan have been investigating questionable financial practices, including high executive salaries, of nonprofit organizations involved in the state’s special education program.  COFAR has called on Bump and Sullivan to expand their probe to examine the entire human services vendor system for persons with intellectual disabilities.

In sum, this is an issue that isn’t going away soon and can’t be ignored.  Salaries and financial practices of human service vendors, insurers and other nonprofit organizations should be a major focus of state oversight.  The other major focus should be on quality of care and services.  To the extent that there are problems or a lack of state oversight in one of these two areas, we believe there are likely to be problems in the other.

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