DATELINE: February 12, 2008, Chicago
We recently wrote a critique of comments and observations made by Bernie Dehler at FreeGoodNews.com. Our critique was a direct response to a summary of Dehler's position that appeared in the Chronicle of Philanthropy's Give and Take Column. The Chronicle then summarized our comments in the same column. Dehler has asked to respond to our critique and in the spirit of open debate, we agreed to publish his response. It now follows:
Hi Jack- 2-12-08
Here’s my response. Your questions are in bold-italic. Overall, I ask that you please have the honesty and integrity to write a follow-up stating how you were wrong and I was correct after all, if you can agree with my more detailed logical explanations below. As it is, you are the only one who has publicly written a chastisement for me. I would appreciate a correction if your mind changes. Feel free to ask more questions, also. You also promised to print this, so I hope you follow-thru… since you don’t allow comments on your blog.
The original posting which said my article was off-base:
Jack B. Siegel wrote:
Put bluntly, who appointed Dehler the arbiter of what constitutes reasonable compensation? He describes the $120,905 as "That's not bad," but then goes onto to describe the $345,293 as "bad…bad, bad!" We'd like to know the basis for Dehler's conclusions.
I am not the “arbiter.” My purpose is to show that reason can be used to determine salaries. I explain a method for determining CEO pay: comparative salary surveys. I have done these surveys for the last three years, personally. The prior ones were in much more detail, with more organizations and graphing analysis. All of my data is also freely available for others to critique at my website; example:
You are right, I should have explained why “bad” or “good.” I updated the article to make it clear it was based on my experience from previous detailed salary reviews of CEO pay. I’m sorry I left you guessing on that.
Jack B. Siegel wrote:
He does not describe exactly what services Graham provides to these charities, nor does he describe the outcomes achieved by these charities. It may be that Graham is a highly effective leader and that both charities accomplish many positive outcomes. If that is the case, Graham may be worth his weight in gold, entitled to every penny he earns.
Worth “weight in gold” is quite an exaggeration! Gold is over $900 per ounce. A 180 pound man would be 2880 ounces (1 pound is 16 ounces), worth $2.6 Million. Yes, I’m sure there are great outcomes, but why does the CEO get such credit? If he has hardworking and smart VP’s, they can also make the CEO look good. There’s no reason to go ga-ga over a CEO because they are a celebrity, or a son of a celebrity. Again, the ultimate reasonable method is considering CEO pay according to their peers… something I’ve looked at in great detail and provide the tables and graphs for free.
Jack B. Siegel wrote:
The use of the phrase "double dipping" carries negative connotations. Yet, (Franklin) Graham may be working 80 or 90 hours a week. The fact that someone earns two paychecks doesn't automatically equate with double dipping—which we take to mean that someone is being paid twice for the same work. There are many Americans who work two and even three jobs. They aren't double dippers. They are simply busting their butts to support their families, earn money for investment in small businesses, or trying to put themselves through college.
I don’t think it is reasonable to expect anyone, even a CEO, to be working 90 hrs. per week. The latest form 990 tax returns (which are for 2004) on GuideStar.org for Samaritan’s Purse and BGEA both say that Franklin worked 40+ hours at each one. I seriously doubt it. In addition, even if he did work 90 hours per week, so do other CEO’s in that case. There is nothing special about Franklin as if he is some kind of super-human guy who works all of his waking hours, unlike everyone else and all other CEO’s.
Click here to see the BGEA tax return: http://www.prettygoodnews.com/form_990/2004-bgea.pdf
and here for the Samaritan’s Purse tax form, to check my claims:
Jack B. Siegel wrote:
It may turn out that Dehler is right, but we don't see sufficient facts mentioned in his commentary to support his claim. It appears that he simply believes $466,198 is too much money for someone to make, particularly a religious leader.
As I wrote previously, I have done extensive salary reviews personally, and provide the tables and graphs for free at FreeGoodNews.com if you’d like to investigate my work.
Jack B. Siegel wrote:
As we have noted before, we reject the knee-jerk assertion that people who work in the nonprofit sector must accept less than market rates of compensation for their services. The views reflected by Dehler and others are potentially harmful to the sector because they can lead to misguided hiring and compensation decisions. We'd much rather see a charity pay a premium for an executive who can achieve extraordinary results than hire a second rate manager who maintains the status quo and accomplishes little.
I’m not suggesting that any CEO receive “less than market rates” as you put it. In fact, my whole argument is that they SHOULD receive market rates, and I expose those who are overboard, as determined by peer analysis. Obviously, a charity can pay a “premium” as long as it is within range of their peers. Certainly, being paid in the 75% percentile would be “premium,” and the CEO’s I expose are well over that.
Jack B. Siegel wrote:
At the end of the day, neither Dehler's, nor our opinion matter. As the Chronicle points out, Dehler's survey is derived from publicly-available data. That means donors to the Billy Graham Evangelistic Association, Samaritan's Purse, and the other charities mentioned in Dehler's survey can curb what might be excessive salaries by voting with their pocketbooks. If donors chose not to examine the publicly-available data, they have only themselves to blame if their money is going to waste.
I agree, but it seems that no one else is exposing these overpaid CEO’s, and that is why I take time to do it. It is really a distraction for me and not my main calling; but I do it because I feel that it is necessary and those who should be doing their job aren’t doing it very well, such as ECFA. That is why I am also exposing ECFA for their lax standards of not even requiring that and ECFA-member tax form be filled-out completely. This is explained here:
Dehler should focus less on raw numbers and more on the process by which compensation is set. That is always the more relevant inquiry, as state regulators, the IRS, and the courts will tell you.
I would love to see the process that these overpaid CEO’s have used. As it is, they must know that they are in the wrong, because they refuse to discuss it with me. They choose to ignore me, as does ECFA. Ignoring seems to work for the,,, until a grass-roots revolt looks likely. Then they will react. [Charity Governance now paraphases Dehler: Dehler claims that he spoke with a VP at one ministry about what Dehler claims was the ministry's overpayment of its CEO. Dehler characterized the VP as "acting passive-aggressive… promising they’d like to talk by phone anytime, but refusing multiple attempts at setting up a phone meeting."]
Jack B. Siegel wrote:
My problem with your position is that you think a number is too big, but (and I don’t say this as a putdown), why does your opinion count? At one point, you say $120,000 is OK. I can guarantee you there are people who think $120,000 is way too much.
I answered this earlier—I have done extensive salary surveys and charting… and the data is freely available at my website.
Jack B. Siegel wrote:
To me, the issue you have raised has nothing to do with religion. These are private associations. Their boards determine what is the proper salary. If you don’t like it, nobody says you have to give money to the organization.
It has a lot to do with religion. Christianity claims to be the superior religion, and I believe it. As such, their practitioners should be amongst the most noble and righteous of all people. That makes money mis-management even more disturbing, and hypocritical. [Charity Governance now paraphases Dehler: At this point, Dehler describes an open letter from Dehler to a certain pastor. Dehler asserts that 3 of 4 members of the board were family (him, his wife, and his son). Dehler goes onto assert that this pastor has since shifted the operations to his church. Dehler speculates that the pastor did this so he no longer has to disclose his $1 million plus yearly compensation.]
Jack B. Siegel wrote:
Moreover, you are free to start your own organization and compete for donor dollars.
As you probably have guessed, I have done that. I’m the CEO of FreeGoodNews.com, a 501c3.
Jack B. Siegel wrote:
Donors can look at the Form 990 and decide the ECO’s salary is too high and give elsewhere. If no Form 990 is filed because the organization is a church, donors can ask before they give. But at the end of the day, why do you or I have the right to tell someone what they should make?
I agree- donors can ask for finances. Do we have the right to tell someone what they should make? I think we do have the right and responsibility to teach integrity in money management, and you probably even do that in your book. There is a gray scale in pay, but there also is an “over-the-top” line that should also be evident. [Charity Governance now paraphases Dehler: At this point, Dehler returns to the pastor mentioned earlier, claiming that there should be no debate that the pastor's $1million plus yearly compensation is "way overboard." Dehler "can’t image ANY finance professional backing him on that one… unless it was a member of his family ;-)"]
Jack B. Siegel wrote:
The real problem with your view is that it feeds into the notion that donors should focus on costs, overhead, and fundraising metrics. It costs money to run an organization and to protect charitable assets. People who focus on costs are in effect looking for a free lunch. They want every nickel of their contributions to go to purchase food for the hungry. That would be nice, but the world requires administration and oversight. People should be focused on the outcomes that are achieved with their money.
No, I don’t think donors should focus on CEO pay only, and never said or implied that; but I think they should take it into account, especially when it is obviously excessive by comparing their CEO peers.
Jack B. Siegel wrote:
As for ECFA, I assume it is a private organization that has members. If Graham’s organization is a member and it doesn’t meet the standards, then ECFA has every right to kick his organization out, assuming the rules so provide. But just because an organization sets standards doesn’t mean those standards are right or the law.
I’m after ECFA because the President (Ken Behr) told me a few weeks ago that he would take disciplinary measures with any member who was over the 100% calculated line from their salary surveys, yet I found many of them; and he won’t do anything when notified of it. So he either lied to me, or he’s powerless to do anything… I’m not sure if there are other options for his behavior.
Jack B. Siegel wrote:
The Massachusetts AG just issued a letter in connection with another claim that the head of an organization was being paid too much money. That letter looks at the board’s process for setting compensation. Once the AG determined that the process was appropriate, the AG acknowledged that it was not the AG’s place to argue about specific numbers.
As I said, I’d love to hear of the process used by those who I think is excessive. However, they won’t talk with me. I suppose they have something to hide. There was one exception of one who talked with me, and agreed to adjust their CEO pay accordingly. That story is here:
Answers by:
Bernie DehlerCEO of FreeGoodNews.com
[Charity Governance: If ECFA would like to respond to Dehler's criticisms, we will reprint the response after we review it--just as we reviewed Dehler's comments.]
