The Sector’s Sensitivity to Executive Pay

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Ruth McCambridge

I’d like to point your attention to an interview with Dr. Paul Light regarding public attitudes about executive pay in public service – government and nonprofits – from our new Summer issue of Nonprofit Quarterly. But first I want to comment on why this issue is so alive among us and why I don’t think it’s merely an obsession of journalists out for a quick hit. 

This morning we published a newswire about Cleve Killingsworth, the nonprofit health insurer CEO in Massachusetts who was paid an $11 million severance package even after the organization suffered losses. The organization, Blue Cross of Massachusetts, has now decided to provide so-called rebates to their customers equaling $4.2 million to try to mollify some of the ongoing public outrage. 

But they are not going to try to renege on the payment to Killingsworth, who presided over the organization while it suffered losses and was probably in some way “asked to leave.” He will keep his money, and the “rebates” will be taken out of the organization’s current profits. This type of deal is, of course, not unusual in corporate America.

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But, in some ways, this story epitomizes the reasons why people believe that pay in the nonprofit sector should be different from pay in the for-profit sector. The question is – if this is a nonprofit and people are struggling to pay their sky-high and steadily increasing premiums, why was a severance package like this even considered? And, if the money was there to pay a rebate to customers under political pressure, why are people being charged higher rates in the first place?

In other words, who “owns” this nonprofit organization, and do we have any reason to trust that it is operating in the public’s best interests?

Making matters worse, the board, until recently, has been well paid also. 

In whose best interests are these actors functioning, and how is the public assured of that? This case is a poster child for why the public does not trust our considerations of pay levels. While most of us are, of course, well within or below reasonable limits for pay, there are these high fliers among us, and in this case the money that Killingsworth walked away with came very directly from millions of families’ pockets, some of whom are legitimately concerned about such stuff as getting by from day to day.

Meanwhile, “the Blues” are also under the microscope all over the nation for maintaining excessive reserves. It’s time to look at their regulation on a more consistent basis.

The previous column was taken from NPQ’s eNewsletter, written by Editor in Chief, Ruth McCambridge. Click here to have it delivered free to your inbox.