June 14, 2012; Source: BusinessJournalism.org (Reynolds Center)
Some nonprofits hide the real compensation levels of their chief executives by splitting it between the nonprofit and subsidiaries but we are glad to let you all know that the Reynolds Center for Business Journalism issued an advisory yesterday that lets reporters in on the trick, telling them how to dig for the full compensation information.
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John Cheves, a reporter for the Lexington Herald Leader, tells his peers that he was doing an investigation of a for-profit arm of a nonprofit mental health center when he recognized the practice. From the article:
“Today’s Tip: Check non-profit’s subsidiaries to see if executives earn additional pay. ‘I just like to track every arm of the structure because executives can take some or all of their pay through subsidiaries,’ he says. ‘The previous CEO of the non-profit, now retired but still present as a paid consultant, is getting his paycheck through the for-profit, not through the non-profit mothership.’”
And just an FYI, you might also wish to look for other conflicts as well. Is a board member, vendor or family member of one group being paid at another related organization? It’s always good to look. –Ruth McCambridge