The Latest Trend In Hiding Compensation Within The Nonprofit Sector

There’s a thought-provoking article by Sarah Pulliam Bailey in the 1/17/2020 edition of the Washington Post that examines a growing trend among evangelical organizations to shift from a traditional nonprofit status to what the IRS defines as a “Church” status. The impetus for this is a desire to obfuscate executive leadership compensation.

Adaptistration People 041While both status allow donors to deduct charitable gifts, the Church option provides the ability to hide compensation while only losing the ability to engage in political lobbying efforts.

Critics of this trend point out that the restrictions are easily sidestepped but donors and transparency advocates have no recourse when it comes to discovering top tier compensation packages.

All of this overlaps a great deal with issues surrounding executive and music director compensation within the nonprofit performing arts field.

While the lion’s share of nonprofit performing arts orgs include CEO and music director compensation in their public tax filing, there are still a few holdouts each year that share a perspective akin to the religious institutions highlighted in the Post article.

Things get even murkier when you weave in the numerous methods for reporting compensation after the fact when and therefore no longer within the realm of influence or accountability. The field has seen more than its share of instances where cuts to executive compensation implemented during austerity measures returned once a long-term concessionary labor agreement is signed.

Transparency and accountability are bonds of trust nonprofits form with donors. They are cornerstones of legitimizing mission driven activity. The regular erosion of these donor protections across adjacent nonprofit sectors should come as a sober reminder that what we take for granted now, can be turned on its head in short order.

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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