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Minting millionaires at St. Louis area nonprofits

Minting millionaires at St. Louis area nonprofits

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A group can call itself “not-for-profit,” but the people who run it can be profiting big. That’s clear from a check of executive pay at St. Louis area nonprofit organizations.

It raises a question: Should tax-exempt organizations, many of which seek charity from the public, be minting millionaires in their executive suites?

The yearly takes ranged from $4.2 million for Steve Lipstein, who runs BJC HealthCare, down to zero for Dr. Patricia B. Wolff, a retired doctor working for free running Meds & Food for Kids, a $2.5 million St. Louis charity that feeds children in Haiti.

The spot check, taken from IRS filings for 2012 and 2013, showed that million-dollar-plus salaries aren’t uncommon for administrators at big nonprofit hospital groups here.

BJC, which reported $3.8 billion in revenue in 2013, had seven million-dollar-plus executives that year, the last report available. Mercy Health had nine in 2012 including former chief administrative officer James Jaacks, who left that year after being paid $3.8 million.

Mark Wrighton, the chancellor of Washington University, and David Robertson, music director of the St. Louis Symphony, also topped the $1 million mark.

Hospitals, colleges and the symphony seek charitable donations, but they’re mainly self-supporting. They charge for their services.

Six-figure salaries seem to be the rule here for the top people at charities that survive mainly on public donations. Gary Dollar, the former head of the United Way of Greater St. Louis, made $511,000 in his last full year on the job in 2012, running a group that collected $75 million in charitable contributions that year. Lewis Chartock, CEO at MERS Goodwill, made $594,000 in 2013 running a $146 million charity that operates thrift stores and services for the disabled.

Those paychecks put them in the top 1 percent of earners in the country. Should do-gooder executives be paid by the same standards as executives at private companies who are clearly in it for the bucks?

“Just because you came to the nonprofit sector does not mean you have taken a vow of poverty,” says Lindsay Nichols, spokesman for GuideStar, a Virginia-based nonprofit that acts as a clearinghouse for information on other nonprofits. (Its CEO makes $162,000 per year.)

But the public likes charity leaders to be more like monks than misers. In St. Louis, where median household income is about $47,400 per year, some nonprofit salaries can look princely.

Dan Pallotta, who runs a Massachusetts company that produces charitable fundraisers, touched on that feeling in a 2013 TED talk.

“We have a visceral reaction to the idea that anyone would make very much money helping other people. Interesting that we don’t have a visceral reaction to the notion that people would make a lot of money not helping other people,” he said in the talk. “You know, you want to make $50 million selling violent video games to kids, go for it. But you want to make half a million dollars trying to cure kids of malaria, and you’re considered a parasite yourself.”

Pallotta’s point was that to get smart people into nonprofit works, they have to be paid well. They won’t do it for love.

In explaining pay-setting methods, nonprofit officials describe procedures much like those in corporate proxy statements. They compare salaries among similar charities. Sometimes they hire compensation consultants.

Some reward executives for reaching goals. At BJC, much of Lipstein’s pay is based on patient satisfaction, reducing costs, patient safety and other measures, BJC spokeswoman Kimberly Kitson said.

The IRS requires that pay be “fair and reasonable,” and the charity must have research to justify salaries. “As you can imagine, there are many shades of gray,” says Nichols, the GuideStar spokesman.

STAYING COMPETITIVE

Charity boards feel pressure to keep up with the competition, which includes private employers.

“I think it’s important that you have a competitive salary if you want to attract talent,” said Christopher Tabourne, the Enterprise Holdings executive who chairs the MERS Goodwill board.

Whether a nonprofit really competes for talent with private enterprise may depend on the sector.

“The dynamics are very different in the hospital field where the lines between nonprofit and for-profit have substantially blurred,” said Tom Pollak, who runs the National Center for Charitable Statistics at the Urban Institute.

But a social movement — saving the environment, for instance — might still draw good talent on the cheap, Pollak notes.

Other charities are in the middle. They’ve come under pressure from grant makers and government funders to show measurable results, says Pollak. There’s also a trend for charities to make money by selling things or services.

All that has charities thinking more like businesses, and looking for the same people.

At the United Way, former CEO Gary Dollar’s $511,000 pay for 2012 included a “thank you” for years of service and retirement pay during his last year, said Steve Maritz, United Way board’s current chairman. Dollar’s successor, Orvin Kimbrough, made $279,000 in 2013.

Do such salaries discourage donations?

“When you’re asking people for money, you’d love to have a volunteer staff, but unfortunately that’s not realistic,” Maritz said. The board looks mainly at pay at other United Ways when setting salaries, and the St. Louis operation is the nation’s fifth-largest.

Even the top nonprofit salaries here pale beside the biggest corporate paychecks. Last year’s top corporate earner — Michael Neidorff of Centene, the Clayton-based health management company — collected more than four times more than the chief at BJC.

Big administrator salaries at hospitals might irk a patient looking at a fat bill for a hospital stay. Do fat salaries push up health care costs?

Not by much, say the hospitals. At BJC, salaries of “key and highly compensated” employees eat up about 1 percent of revenue, according to IRS filings.

Nonprofits are tax exempt because they work to benefit people, not to make money. But critics have noted that the hospitals aren’t very charitable.

Charity care at BJC amounted to 3.3 percent of revenue at BJC in 2012. It was 3.7 percent at SSM Health and 2.8 percent at Mercy, according to the St. Louis Area Business Health Coalition. All are nonprofits. Tenet, a big for-profit hospital chain in town, gave away 3.3 percent.

Data on nonprofit pay runs at least a year behind. Some St. Louis charities have yet to file their 2013 reports with the IRS.

GuideStar, which runs an annual compensation survey, reports that pay raises have slowed since the Great Recession shrank charitable giving. The average pay hike was 2.2 percent in 2012. That was the highest since 2008, but only half the typical raise before the recession.

The median pay for a nonprofit CEO in the Midwest was $108,000, but pay varied by the size of the charity. Nationally, groups with expenses greater than $13.5 million paid $256,143 on average to the CEO. Those with expenses of $3.5 million to $13.5 million paid $148,659 to the chief. Those with expenses of $1 million to $3.5 million paid $97,158.

Disclosure: My wife, Susan Gallagher, works for the St. Louis Zoo, which receives tax money, seeks donations and grants and raises money through sales.

Editor's note:  This story was changed to correct the spelling and headquarters location of GuideStar.

SELECTED ST. LOUIS NONPROFITS

ORGANIZATION TOP OFFICER TOTAL COMPENSATION YEAR TOTAL REVENUE
BJC HealthCare Steven Lipstein, CEO $4,238,181.00 2013 $4.1 billion
Mercy Health James Jaacks, chief administrative officer $3,837,611.00 2012 $4.8 billion
SSM Health William Thompson, president $3,263,042.00 2013 $4.9 billion
Mercy Health Lynn Britton, CEO $2,540,009.00 2012 $4.8 billion
Washington University Mark Wrighton, chancellor $1,267,353.00 2012 $2.68 billion
St. Louis Symphony Orchestra David Robertson, music director $1,012,158.00 2013 $30.7 million
MERS Goodwill Lewis Chartock, CEO $594,501.00 2013 $146 million
Missouri Foundation for Health Robert G. Hughes, CEO $428,605.00 2013 $141 million
St. Louis Symphony Orchestra David Bronstein, CEO $423,603.00 2013 $30.7 million
Municipal Theater (The Muni) Dennis Reagan, CEO $384,777.00 2012 $15.9 million
United Way of Greater St. Louis Gary Dollar, CEO $307,581.00 2013 $76 million
Great Circle (Boys & Girls Town) Vince Hillyer, CEO $293,634.00 2013 $44 million
United Way of Greater St. Louis Orvin Kimbrough, CEO $279,545.00 2013 $76 million
St. Louis Area Food Bank Frank Finnegan, CEO $189,198.00 2013 $68.8 million
Big Brothers & Big Sisters of E. Missouri Rebecca James-Hatter, CEO $171,687.00 2013 $4.2 million
Catholic Charities of St. Louis Brian O'Malley, former CEO $160,952.00 2012 $2.5 million
Habitat for Humanity St. Louis Kimberly McKinney, executive director $123,080.00 2013 $4.9 million
Gateway 180 Homeless Services Kathleen Heinz Beach $78,003.00 2013 $1.4 million
Meds and Food for Kids Patricia Wolff, executive director $0.00 2013 $2.5 million
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