Paying for poor performance

Sunday, September 26, 2010 at 10:45pm

Four of the nonprofits we examined showed signs of a disconnect between leadership compensation and the outcomes that their CEOs have delivered:

Easter Seals of Tennessee

CEO compensation: As Easter Seals ran up mounting deficits from 2002 onward, its board (with as many as 29 members at times) bestowed average annual compensation increases of more than 8 percent annually on CEOs Jayne Perkins, Gingi Lanius and Susan Armiger.

What happened: The disastrous, debt-heavy development of an adjoining pair of Green Hills facilities, initiated under Perkins, ultimately led to a Chapter 11 bankruptcy filing in 2009.

How to explain: Newly installed CEO Rita Baumgartner said the rate of increase in recent years “could be very misleading,” since former chief Armiger was compensated in part for taking over Easter Seals operations in West Tennessee. Armiger was a turnaround specialist who devoted her tenure to guiding the organization through the bankruptcy process, from which it emerged in August.

Cheekwood Botanical Garden and Museum of Art

CEO compensation: Former CEO Jack Becker raked in annual pay raises averaging 10.9 percent between 2006 and 2008.

What happened: For those three years, fundraising expenses came in at 17.8 percent a year of total expenses, more than double Charity Navigator’s median among charities nationally of 7.4 percent. And Cheekwood spent 36 cents for every dollar raised, more than triple the national norm of 10 cents.

How to explain: “The ratio used to compute this efficiency rating included an auxiliary activity that supports Cheekwood,” new CEO Jane Offenbach said in a prepared statement. “The fundraising expenses as a ratio of total expenses without that activity is 7.52 percent, which is in line with the national average.” Asked to confirm that the “auxiliary activity” is the Swan Ball — Cheekwood’s main fundraiser and Nashville’s premier annual high-society event — Offenbach declined further comment.

Boy Scouts of America, Middle Tennessee Council

CEO compensation: Current Scout Executive Hugh Travis took over for longtime leader Joe Long in 2008. Their average compensation of just under $300,000 a year from 2007 to 2009 was more than double the $146,000 median among 184 mid-sized nonprofits in the South covered by Charity Navigator.

What happened: The total number of youth served by the Middle Tennessee chapter has fallen from around 50,000 to 38,000 in recent years.

How to explain: “The youth decline centered in the school-based programs called Learning for Life,” Travis said. “Factors were the restricted access to schools and the economic downturn. Our traditional uniformed programs, Cub Scouts, Boy Scouts, Venturing and Exploring, grew 1.1 percent last year.”

Mercy Ministries of America

CEO compensation: In 2006-08, founder Nancy Alcorn enjoyed the largest average annual increase on
a three-year basis of any major local charity chief that The City Paper evaluated: 14.3 percent a year.

What happened: Mercy Ministries offers a residential treatment program for at-risk teenage girls and young women. An Australian offshoot was shut down in 2008 amid government investigations and accusations of cult-like treatment. Nashville’s Mercy operation also faced accusations of serious maltreatment.

How to explain: Spokeswoman Christy Singleton pointed out that changes in Internal Revenue Service tax forms affected the reporting of Alcorn’s compensation. She said that income from Alcorn’s books and speeches goes to Mercy Ministries. She asserted that Mercy Ministries of America was “completely separate” from the Australian operation: “They did not have any legal link at all to the U.S. organization.”

But for years, the Mercy America website promoted the Australian program as “a place that is safe, full of hope, forgiveness and grace” and offered a brochure featuring a photo of Alcorn.

Her message there concluded: “Please pray about how you can help the work of Mercy Ministries Australia today.”

Singleton also said that the Nashville Scene treated Mercy unfairly in a 2008 exposé on its local operations.

2 Comments on this post:

By: govskeptic on 9/27/10 at 6:37

Mercy ministries has a wonderful organization that certainly
doesn't deserve much of the press coverage they have
received. Nancy Alcorn is no job to job technicrat looking
for a hugh salary, but a woman who has devoted most of her
adult and professional life to this one organization!

By: frodo on 9/27/10 at 3:28

There is always a story behind the story behind the story. I applaud E. Thomas Wood for this series. We have a robust nonprofit sector in the Nashville area that accomplishes much and does it more efficiently than the more political institutions lingering overhead...oh, did I say "overhead?"

It should also be mentioned that our area's faith communities do a great deal to help out, and not just for their own members. Stacking the oft-heralded accomplishments of nonprofits atop the lesser known caring for the community through churches and the like, I hazard a guess that we accomplish much more among ourselves than government does for us.

We can help keep our nonprofit sector both clean and well-oiled by keeping the spot-light turned on in the objective way this series of articles provides. And, I might add, this series is more healthy than the hit-n-run hatchet pieces that other paper brings to our scene.