Today, we are running a newswire about Blue Shield of California, which some months ago had its tax exemption revoked, a measure it is appealing. The reason for the revocation, to put it simply, is that Blue Shield has been determined to not be acting substantially like a nonprofit.
But even as it makes its appeal, it continues to make the state’s case by turning itself inside out to hide the compensation of its top executives, including what is reported to be a severance payment for a former CEO somewhere in the neighborhood of $20 million…on top of whatever he has left over from living off a paltry $4.6 million a year.
There are good reasons why the level of pay for top executives of nonprofits must be reported. It is part of ensuring accountability to the public, in whose name we do business. A spokesman for the organization says it is just trying to “respect the privacy” of its employees. To me, this suggests that those employees might be embarrassed by their own greed made public.
In this case, many citizens may feel they have a dog in the fight since their payments into health insurance are being used to support such excesses. And while such behavior might be expected in the business sector, it is not part of the contract for nonprofits. Those tax exemptions carry with them an expectation that the interests of the public come first. And, given those public interests, once a good press outlet gets wind of this refusal to disclose, it will not keep the information quiet; rather, it will shine a spotlight on it.
This case, of course, does not stand by itself—it’s a part of a larger problem with nonprofit health insurers. Recently, in Massachusetts, a similar case of an outsized severance payment drew the wrath of that state’s attorney general, exposing the fact that the board was also drawing compensation. In the end, however, the more high-profile issue with this field of nonprofits is what’s viewed as hoarding behavior on their part—accumulation of reserves far in excess of need, even as their members struggle to find the money to make payments.
Not a good look for a nonprofit; not a good look for us in the sector.