Friday, January 16, 2015


There is no doubt that there are a variety of reasons that we rarely, if ever, see or hear a comprehensive discussion, let alone criticism, of the growing differential between Federation executive pay and perks and executive performance in so many places. 

Here is how the process works (or, in so many places...doesn't work):

  1. For a newly hired CEO, a sitting Compensation Committee examines competitive salaries for the position, engages a Consultant to "advise" that the amount being considered meets standards of "fairness" and equity, the CEO in negotiation submits the "comparables" -- the compensation being paid others similarly situated (usually by City-size) -- and the parties allegedly "negotiate" a pay standard that the lay leadership believes it can defend. At no point, in most instances, do these Committees consider the reality that this incoming CEO has yet to accomplish a thing; whereas those with whom he/she is being compared probably, hopefully, has.
  2. For a sitting CEO, the Compensation Committee operates in exactly the same way. Given the results listed in The Forward's annual salary study, it is evident that in too many instances compensation is awarded without regard for achievement.
I served on the "Compensation Committees" of multiple law firms in the course of my career; at none of them...not a one...were partners rewarded for anything other than actual performance -- they were compensated for their success that contributed to the success of the Firm. That's true in any business -- but, just look at JFNA where the current CEO compensation has no rational connection to success or performance. He (and his predecessor) were paid according to nothing more than their demands -- G-d forbid if we were to lose them! (I remember when Bobby Goldberg, then the JFNA Board Chair, told me in total incredulousness that Silverman's predecessor had demanded higher pay than Steve Hoffman, his predecessor. When Bobby asked him how he could make such a demand, the response: "Because I am better." P.S., he received the compensation package he had demanded. [And, he ended up being far from "better."])

When an excellent federation CEO left the system to lead FRD for our most major overseas partner, his compensation requirement was simple: that it equal the amount he would have been paid had he remained as his federation's CEO. This was agreed to by the organization's Chairs but came as a shock to many within the organization, some of whom used that compensation as a basis on which they worked in the shadows to undermine the new FRD professional's work from the get-go. My response when asked: "It's the price one pays to get the best -- but be certain you are getting the best before you pay or overpay for mediocrity." (In the instance of this example, the FRD professional has far, far exceeded what I or anyone else could have predicted -- raising tens of millions essentially on his own.) Organizations which have paid far more for far, far less are the ones whose leaders should hang their heads in embarrassment.

In too many instances today, the lay leadership rationale for what was once considered to be "excess compensation" is: "I have comparative numbers that justify this pay level in my file." And, that's it -- not performance, not success, not even competency; just a file that will withstand IRS or State scrutiny and will "protect me.". In the trial of former Virginia Governor Bob McDonnell and his wife for, among other things, public corruption, the Judge gave a seminal definition of "circumstantial evidence" in his jury instructions. The Judge   defined by example: "...awakening after a cold night to find six inches of fresh snow on the ground and concluding that it snowed overnight." This is exactly the parallel evidence that the JFNA Board Chair and his cronies and too many Federation leaders have chosen to ignore in awarding compensation unrelated to performance or success. 

Of great interest in this context is the requirement of New York State non-profit law that executive compensation directly relate amount of pay to achievement. As one New York State Attorney General put it: "the compensation paid must equate with the value of the services received." In other words, a State law requires more of non-profit CEOs and the Boards who hire them than do the lay leaders of the regulated non-profits themselves.

How and when will this stop? When will lay boards and officers stand up and "just say no" to the preposterous demands of job applicants and sitting CEOs who have not demonstrated success? Well, probably...never. Unless at some point there is a court decision determining that "compensation fairness opinions"  and comparative data are insufficient, in and of themselves, to award compensation unrelated to successful achievement. 

In other words...never.


1 comment:

Anonymous said...

Sadly, the CEOs and their ilk in non-profits take their cues from the for-profit world.

It is hard to imagine an individual that has done more damage to more individuals in America in the past 5-10 years than Jaime Dimon of JPMorgan Chase.

Frankly, this man should be in jail. At minimum, he should be out of a job. Instead, he is still in demand and lavished with riches.