Goodwill Industries Omaha: The Ugly Wage Ratios that Define this Nonprofit Business

Goodwill-truck

Goodwill Truck on the freeway / swong95765

October 23, 2016; World-Herald (Omaha, NE)

Henry Cordes has written a series of articles for the World-Herald exposing a set of unsavory management practices at the Omaha Goodwill that are an affront to taxpayers and donors. Though the articles largely focus on executive pay as compared to other local mega-groups and Goodwill organizations of a similar size, the larger picture exposes a number of unethical practices that should be of major concern to government funders and supporters.

First and foremost among the issues Cordes identified is the fact that while this organization’s executive compensation was definitely on the high side, soaring one year to nearly $1 million for the CEO alone, it was paying many of its disabled workers a sub-minimum wage under the now-controversial Section 14(c) of the Fair Labor Standards Act. Organizations must apply for a special certificate that allows them to pay a wage below the minimum, and in 2013, when NBC News did an investigation, they found many as 69 Goodwill franchises across the country had such certificates, sometimes paying less than a dollar an hour. NBC had to file FOIA requests to find out just how much those workers were earning, and it uncovered that at 14 locations, workers were making 23¢ or less hourly. Cordes goes on to note that this law has come under increasing disfavor among advocates for people with disabilities and that many Goodwill branches that formerly used the certificate have divested themselves of it.

Additionally…

  • Part of the work Goodwill Omaha had workers with disabilities doing was repackaging Chinese-made rollers in packages marked “Made in America” for sale as American-made goods.
  • The organization includes a number of highly placed staff members who are related to the CEO or board members or their own supervisors.
  • Of the $4 million in profits made from the $30 million operation, only $566,000 was spent on job-related program costs. The rest of these costs were covered by grants.

Cordes writes:

While Goodwill Omaha runs job training and assistance programs that serve thousands annually, nearly all of those activities have been funded by government grants and contracts—not the $4 million in annual profits generated by Goodwill’s thrift stores in eastern Nebraska and western Iowa. Even its signature program that employs disabled job trainees within its stores is primarily funded by school districts. Goodwill officials identified only $557,000 in jobs program spending in 2015 that was funded by retail sales. Most store profits are being consumed by administrative overhead, which includes much of the pay to its top leaders.

“At Goodwill, we often refer to ourselves as a caring community enterprise,” the nonprofit’s CEO, Frank McGree, said in a prepared statement. “We exist to serve the training and employment needs of our disadvantaged citizens, and we do that primarily through an effective and profitable business model utilizing a network of 17 successful area retail stores.”

Part of Frank McGree’s $933,444 in compensation in 2014 came from a retention bonus of over $500,000. On top of that, he received a $95,000 incentive payment and $52,000 in deferred retirement pay. There were, to Cordes’s count, 13 people who made six figures at the agency that year, and apparently, as we said, more than 100 who made subminimum wage.

Unlike many other reporters in mainstream press, Cordes has done an excellent job at putting the executive compensation in context. In the end, the picture shows an organization that purports to function in the best interests of people with disabilities but pays those folk poorly and its executives on the high side while supplementing the low salaries—and the entire operation—with tax dollars and donations from the public. Just how nonprofit is it?—Ruth McCambridge