Executive, Regulate Thyself (Before Government Does It For You)

An article by Wyatt Buchanan in the 11/13/2008 edition of the San Francisco Chronicle reported on legislation from San Francisco Supervisor, Jake McGoldrick, on “limiting nonprofit executive salaries and benefits for executives to six times the total compensation of their lowest-paid full-time employee.” The Chronicle’s article and the current economy make this a very topical subject…

Before going too far into this issue, I want to make it clear that although the Chronicle article lists San Francisco Symphony (SFS) executive director, Brent Assink, among their list of “best-compensated nonprofit executives in San Francisco” this discussion has nothing to do with Brent’s compensation or his work at the SFS. Instead, the Chronicle’s article serves as useful tool to re-examine the issue of executive compensation amidst current economic conditions.

The key to avoiding reactionary scrutiny is transparency and accountability
The key to avoiding reactionary scrutiny is transparency and accountability

As has been pointed out in earlier articles on the topic of executive compensation, there’s no magic formula or cap; instead, it is better to focus on achievement over effort tempered by accountability and transparency. Simply put an executive capable of building a strong board that brings in buckets of revenue and presides over an organization that sells all of its seats while nurturing an exciting and satisfying artistic environment is worth pretty much whatever they want to be paid.

Unfortunately, the procedures needed to adequately measure those components in an ongoing basis don’t exist. The result is stakeholders don’t usually find out what’s going on without first having to dig through a mountain of spin being thrown at them a year or more after the fact. The natural byproduct of this environment when the economy goes into a downturn is one of finger-pointing, golden parachutes, and asinine legislation.

So until the business adopts stronger policies regulating transparency and vigorously implements firm but fair measures for accountability there won’t be any shortage of legislation like that coming from San Francisco. It is worth pointing out that by and large, the general public isn’t patient enough to discuss issues of nonprofit executive compensation rationally and you can bet that any time the topic comes up, the impact from that environment will produce less than satisfactory results. Just look at the Chronicle’s related poll asking readers to vote on whether or not they feel the plan to limit nonprofit exec pay is worthwhile. At the time this article was written, the results favored the plan by a margin of two to one. If you want more proof, just wade through the more than 100 reader comments.

Ultimately, the business would be in a much better position to defend itself against public/government backlash if executive compensation (all of it, including bonuses, special loans, deferred pay, etc.) for nonprofit organizations was made public at the time a contract is signed, not three years after the fact. Furthermore, increased access to income and expense figures for current seasons should be made public no less than two quarters after the fact. The sooner the business moves in this direction, the better.

About Drew McManus

"I hear that every time you show up to work with an orchestra, people get fired." Those were the first words out of an executive's mouth after her board chair introduced us. That executive is now a dear colleague and friend but the day that consulting contract began with her orchestra, she was convinced I was a hatchet-man brought in by the board to clean house.

I understand where the trepidation comes from as a great deal of my consulting and technology provider work for arts organizations involves due diligence, separating fact from fiction, interpreting spin, as well as performance review and oversight. So yes, sometimes that work results in one or two individuals "aggressively embracing career change" but far more often than not, it reinforces and clarifies exactly what works and why.

In short, it doesn't matter if you know where all the bodies are buried if you can't keep your own clients out of the ground, and I'm fortunate enough to say that for more than 15 years, I've done exactly that for groups of all budget size from Qatar to Kathmandu.

For fun, I write a daily blog about the orchestra business, provide a platform for arts insiders to speak their mind, keep track of what people in this business get paid, help write a satirical cartoon about orchestra life, hack the arts, and love a good coffee drink.

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