A BEST PRACTICE THAT WILL NEVER BE REPLICATED

After my tribute to the over-compensated, a Friend and FOB, suggested a methodology employed in his/her community that (a) could be a paradigm for all communities and JFNA and (b) will never be put into broader practice. I offer it as one "best practice" that will never be replicated:

1. CEO evaluations were the result of a process by which the CEO and the Federation Chief Volunteer lay leader agreed upon and selected a group of 4-5 senior officers.  
2.  Prior  to a compensation meeting, we circulated, at various times, a document outlining questions, issues to be discussed, or periodically, we'd make it a more open ended conversation.  
3. It always began with the CEO making a presentation on how he/she did on meeting the goals pre-established during the prior year.  Then we moved to an open forum of Q and A.  This was followed by the officers meeting in executive session to discuss anything they felt to be pertinent, privately.
4. The lay Chair would share with the CEO orally, results of their thinking and a set of meeting minutes/summary would be prepared by one of the officers that the CEO and the lay Chair would sign.
5. The evaluation would then be shared at a regular meeting of the Federation Executive Committee, not the Board. During this period our executive committee had 25 members and the board, over 100.  Our thinking, and this may be a rationale on my/our parts, was that such a large entity with varying degrees of fill in the blanks         , (understanding, involvement,etc.), was not necessarily the best place to hold such a conversation.
6. The board was made aware of the evaluation as well as separately and at a different time, informed of the CEO compensation review and/or contract. The lay Chair would say he/she would be happy to speak with any board member who wanted more details.

What about your federation or what goes on at JFNA? Is there any doubt on anyone's part that had JFNA a fair and balanced, transparent and open evaluation process that Smilin' Jerry would still be smiling'? But it's hard to demand moire of the umbrella organization isn't it when the federations themselves cloak CEO compensation decisions behind a wall of such opacity as is the case in most places.

Then there was an Anonymous Comment that informed us as to the consequences of excessive compensation:

"I don't know if you are aware of the document from Guidestar on the issue of Excess Compensation or the IRS regulations. If not, check this link. https://www.guidestar.org/ViewCmsFile.aspx?ContentID=3890. 

Here's one important excerpt. "Nonprofit compensation practices can also draw fire from the IRS.The IRS is charged with enforcing the Federal Private Inurement Prohibition, which strictly forbids a tax-exempt organization’s decisionmakers—board members, trustees, officers, or key employees—from receiving unreasonable benefits from the nonprofit’s income or assets. Excessive compensation paid to nonprofit executives is the most common violation of this prohibition,1 and it can cause the IRS to levy hefty fines on the persons involved."

What's allowed? Charities can pay their executives market rate.

 • Market rate is determined by researching what someone in a similar position would earn at an organization that is of the same size and has a similar mission or field of activity.

• Charities can look at for-profit compensation when determiningmarket rate, as long as the job, organization size, andorganization mission/purpose are comparable.What are the consequences?

          Consequences of Not Following the Rules:

Penalties for excess compensation range from fines to revocationof an organization’s tax-exempt status. Fines are the morelikely consequence. Known formally as excess benefit transactionexcise taxes and informally as intermediate sanctions, the finescan be levied on both the executive who received the overpaymentand the board members who approved it or who knewabout the excess but did nothing to prevent it. For example:Say the executive director of ABCD Charity received a compensationpackage of $250,000 in FY 2008. After an examination(or, in layperson terms, an audit) of the organization, the IRSestablishes that $150,000 was the appropriate compensation forthe position at that time. As a result of this determination: The IRS requires the executive director to repay the$100,000 overpayment to the organization—with interest.6If the executive director fails to repay this amount, or repaysonly part of it, a 200 percent excise tax may be imposed onthe amount yet to be repaid.7• The IRS may require the executive director to pay an excisetax equal to 25 percent of the overpayment. In this example,the excise tax would be $25,000.8• The IRS may require each board member who approved the excess compensation, or any board member who knew about the excess but failed to prevent the overpayment, to pay an excise tax equal to 10 percent of the overpayment, not to exceed $20,000 per transaction.In this example, should the IRS decide to impose the excise tax, each board member would owe $10,000.

Our federation board annually (or at contract renewal) reviews the terms and compensation of the CEO with full transparency. I wonder if others do also. Are you or anyone aware of these findings and penalties against any federation, federation CEO or Jewish organization CEO? I wonder if there are any"finders fees" for whistle blowers?"

Let's stop feigning ignorance.

Let's say any of us is approached by friend, donor, Board member with the question: "how can you people allow this Silverman to be paid the outrageous amount that he is?" How would you answer?

Rwexler