Mike On Purpose

Finding purpose in the twenty-first century

Archive for September, 2013

Greed is good, apparently

Posted by mikeonpurpose on September 29, 2013


I recently ran across an organization with the rather curious name of the Charity Defense Council, and whose main function appears, as best as I can tell, to be not so much to defend charities per se as it is to defend the payment of stratospherically high salaries for executives of non-profit agencies.

This organization appears to be the brainchild of a guy named Dan Pallotta, who, it turns out, has a vested interest in this issue.   Pallotta seems to have discovered at some point in his life  that he could enrich himself by getting involved in charity work.  Some people might think that charity work is primarily about serving one’s community, rather than achieving  maximum personal gain, but apparently not everyone sees it that way.  Sadly, given some of the salaries that some charities pay their executives, Pallotta was clearly onto something, because there are definitely people there who are profiting handsomely from their jobs at the helms of non-profits.   Wikipedia reports that he was criticized for making a salary of $394,000 as head of his non-profit organization Pallotta Teamworks (I guess if you are going to take in nearly $400,000 from a charity that you created, you have the privilege of naming the charity after yourself.)  While most wealthy charity executives who profit extensively off other people’s altruism might be crying all the way to the bank in response to this kind of negative publicity, Pallotta apparently took these criticisms personally enough that he has taken a proactive stance to defend his personal enrichment strategy, having done such things as writing a book, giving a TED lecture, and creating the above named organization–which appears to be designed to promote his ideas about what non-profits should do with the hard-earned money that people altruistically donate to them for the purpose of helping those in need but which in some cases ends up in the coffers of those who would use that money to pay for their mansions, swimming pools, expensive cars, and first class plane tickets.  Yes, I know what you are thinking, and yet he and other the proponents of this idea are making this case with a straight face.

A look at the organization’s website shows a board of directors that includes other individuals who have a vested interest in justifying and protecting high salaries as executives of charities.  Besides Pallotta, there is Peter Diamandis, who, according to Charity Navigator, was paid over $360,000 in 2011 as CEO of X PRIZE Foundation, and Milton Little of United Way of Metro Atlanta, who also made a similar salary.

From what I can tell, the ideological edifice that Pallotta has constructed to justify this kind of self-enrichment is that charities (and those who evaluate the efficiency of charities) should not be concerned with such petty details as how efficiently a charity uses the money that people contribute to them for the ostensible benefit of those in need,   Efficiency, in other words–which happens to be a criterion very commonly used by many people to evaluate the quality of charities–is just not important, or so he would have us believe.   What matters instead is to look strictly at whatever the charity happens to accomplish, completely abstracted from any consideration how much money it took to get there, or how much money is being spent on the enrichment of certain people.  Offensive as this may sound to many people’s ears, where things get even odder, at least from my perspective, is the suggestion that non-profits should emulate the corporate world in not nickel-and-diming themselves, which supposedly only serves to limit what they can accomplish, but rather by executing bold visions of how they can spend more money to get more things done.  Now perhaps i am just plain misinterpreting the argument that Pallotta is making here, but from what I can tell, this argument seems bizarre on a few levels.  Never mind the little detail that charities might, at least ostensibly, actually serve a different function in society than corporations do.  The first way that this seems just plain wrong is that charities are based on the idea of community service, and they rely heavily on contributions from people who expect as much of their money as possible to go towards those who need it.  The idea that some of what we give might be helping to finance some fat cat’s Jaguar is not exactly what many of us have in mind.  The Charity Defense Council actually says–and this is truly amazing–that it will defend the “free speech rights” of all charities to refuse to describe how efficiently they use their money, insisting that “we will not be forced to speak about overhead when we want to speak about impact.”   It seems that we who give money to them don’t need to know about such things as how efficiently they use our hard-earned money when we give it to them.  Every rip-off “charity” in the country must love hearing this.  In any case–and maybe it’s just me–but from where I sit it seems that all of this is just a  conveniently self-serving ideological framework for those who benefit from it, both those who draw the high salaries and those who don’t want to undergo much scrutiny.

The other way that this “we should borrow the corporate model and refuse to talk about overhead” model seems bizarre is that corporations do, in many contexts, concern themselves with efficiency all the time. For example, during contract negotiations with labor unions, corporations can and do hold the holy grail of “efficiency” over the head of organized labor as a bargaining chip and as a means of extracting concessions from workers–usually while their executives continue to make very high salaries, and of course these executives impose no austerity upon themselves in the name of efficiency.   In general,  corporations like efficiency, because higher efficiency means higher profits for the shareholders, except for the one glaring contradiction that does exist in corporate policy in this area, which involves the salaries of their top executives.  And so when Pallotta says that charities should emulate the corporate model, this is really he seems to be getting at.

Another way in which this argument seems rather bizarre is that lots of non-profits, charities or otherwise, already do pay their CEOs very large salaries, which is to say that whatever it is that Pallotta is fighting for is really already the dominant paradigm in our society.  From CARE to Susan G. Komen to the above mentioned United Way of Greater Atlanta to various non-charities like public universities, high salaries for executives are already quite common, which is exactly what Pallota is advocating for.   In fact, public  as well as private universities are quite notorious in this regard.  Just in the past week or so, reports circulated on  the death of a woman who was part of the non-tenured part-time faculty at Duquesne University and who lived on a salary of $25,000 a year, while the President of that university was making over $700,000 a year.  The problem of high executive pay is, alas, endemic in American society, and charities and other non-profits are not immune from this. So it is a little hard to see what Pallota is going on about, given that what he advocates for is so mainstream.  Maybe he just objects to the fact that there are rumblings of discontent directed at this practice, some of which got directed at him, but that is a far cry from there being any sea change in the works that would challenge the prevailing corporate-based paradigm for high executive pay in the non-profit world.  Of course, there are also many non-profits, especially smaller ones that do not pay their executives excessively high salaries, and I am also sure that some or many charities don’t pay their executives high salaries as a matter of principle.  This practice does vary from organization to organization.  One supposes that Pallotta would like more such organizations emulate the prevailing model of CARE or Susan G. Komen or United Way of Greater Atlanta, although how small organizations that receive little in the way of contributions could afford to pay high salaries to its executives is anyone’s guess.

It appears that Pallotta borrows heavily from the corporate playbook on this whole issue.  The corporate justification for these high salaries is that this is the only way to attract anyone competent enough to do the complex and difficult work of running a big company.  Thus, according to this playbook, if they just paid high salaries to charity CEOs, they would attract those who would accomplish better results.  This has always been a self-serving argument in the corporate world, and it is just as self-serving in the non-profit world.  Never mind all those examples of gross incompetence or companies being run into the ground because of poor business decisions by some of these very executives who are paid so much because of their ostensible skills that are so rare and in high demand (can you say “Blackberry”, anyone?  Or how about, “If it weren’t for the high salaries that BP paid, it could never have attracted someone as skilled as Tony Heywood to run the company.  Oops.  Never mind.”)   However, logic doesn’t play a role in any of this.  The argument for paying executives such high salaries is part and parcel of a rigged system that benefits those at the top of the corporate ladder, nothing more and nothing less.  This is a system that has produced the highest economic inequality in the United States since the 1920s, a system that has resulted in years of economic stagnation for most Americans while the 1% continues to ensure that more or less all the productivity gains achieved in the last generation go exclusively to themselves.  Using assistance for those in need as a means of hitching a ride with the 1% in this inherently unjust system represents just one of many ways of gaming this system.

But since we aren’t talking about for-profit corporations here, but charities, and since charities are ostensibly about community service rather than simply selling a good or service to earn money for shareholders, there is also another angle to this whole issue.  When one argues that charities have to pay big salaries to executives in order to attract people who are competent enough to run them, they area also saying, “Hey, if they didn’t pay people like me such big salaries, we would take our ball home with us.  We would take our rare and superior skills into the for-profit business world where we would be paid what we deserve.”  For anyone running a non-profit, they are, in other words, telling us that as far as they are concerned, working at a charity is just another job among many possibilities, just another means for them of enriching themselves, and that such a job at a charity or other non-profit is fungible with any other job that they might take in the for-profit business world.  Working at a charity isn’t for them, in other words, about commitment to the values and mission of helping others that the charity represents, it is about making as much money as they can for themselves through whatever means to make it work, and if they can do it in the charity world, that’s great, but if they can’t, they’ll go elsewhere to find a means of financing their mansions, swimming pools, expensive cars, and first class plane tickets.

Because, you know, this is America, and in America, greed is good.

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