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December 15, 2010

Executive salaries: How much is too much?

http://www.jewishjournal.com/cover_story/article/executive_salaries_how_much_is_too_much_20101215

After the Forward published its list of Jewish executive salaries, a comment from someone identified as Gabe appeared on the newspaper’s Web site:

“I am appalled that Sarah Bloomfield makes over $542,000 (!!!) [r]unning the USHMM [United States Holocaust Memorial Museum]. I’m pulling the plug on this year’s donation to USHMM. That’s outrageous for a nonprofit.”

Sorry Gabe, but in all likelihood, the museum isn’t all that concerned about your donation, unless it has multiple zeroes hanging off the end.

“These organizations don’t care about what you give, because the bulk of their money is coming from a small group of high-level givers, and high salaries are not a deterrent to those donors and their giving,” Gerald Bubis, founder of the Hebrew Union College-Jewish Institute of Religion’s (HUC-JIR) School of Jewish Communal Service in Los Angeles, said in an interview.

In fact, top givers are setting those high salaries, based on a business model that has taken over how the nonprofit Jewish world operates, Bubis said. Jewish boards have gone from representing a cross section of the community to offering seats primarily, if not exclusively, to the top givers.

And those leaders are inclined to pay salaries that are common in their world — pay packages that enable their nonprofits’ top executives to circulate comfortably in affluent circles and that bespeak the level of confidence the board has in the executive’s ability to run the organization.

Jonathan Sarna, professor of American Jewish History at Brandeis University, doesn’t think it’s a bad model to follow.

“It doesn’t seem to me that these numbers are out of sync in any way with what we know from the larger world,” Sarna said, pointing out that most nonprofits have moved to a business model that includes handsome compensation for top executives. “My sense is that it is unreasonable to assume that Jews are going to be different than the comparable folks in the wider nonprofit world.”

Jewish organizations need to be competitive in a world where executives move back and forth between the nonprofit and the business world, Sarna said. In addition, he thinks the high salaries give average workers something to aspire to.

Of course, for now Sarna worries that employees in the trenches are barely making living wages in some cases.

“What we pay the people at the bottom is more important than the gap between the bottom and the top,” he said.

But Bubis said that gap speaks volumes. He said that 25 years ago top executives were making about four or five times as much as entry-level workers, whereas now it’s upward of tenfold. Middle managers and directors of the service agencies are also not making salaries anywhere near what CEOs of the larger organizations make.

“For me, the issue is that these people — and a lot of them truly are my friends, and I respect them professionally — haven’t brought up the levels of the beginners and intermediate people in the field,” Bubis said.

But the trend may be slowing, said Steven Windmueller, professor of Jewish communal service at HUC-JIR. He says the numbers in this survey — going through 2009 — reflect the vestiges of a decade of sustained growth in the nonprofit world before the recession hit in 2008.

“In those sort of times in which campaigns and contributions were in a growth mode, these kinds of salaries were in vogue in terms of Jewish institutions and in terms of many higher education, charitable and philanthropic causes nationally,” Windmueller said. “But I think it is very striking that in a time in which there is a great deal of downsizing and reconsideration of priorities by donors and charities, these numbers seem almost out of kilter with these new realities.”

While many top professionals in the wider nonprofit world have taken salary freezes or cuts, the Jewish world is lagging behind. Of the 74 organizations the Forward analyzed, only six had executives who didn’t get a raise in 2009, and only nine took salary cuts.

Windmueller says he would be shocked if the 2010 numbers don’t show some readjustment.

Sarna said the Jewish world always has been, and probably will continue to be, ambivalent about this issue:

“On the one hand, American Jews have at times bemoaned the quality of Jewish leadership, and on the other hand, they bemoan the salaries we give these folks in order to compete with other nonprofits and in order to compete with industry.”

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