Glitzy benefits are fading from association executive compensation packages. But a sensible compensation discussion requires more than reflexively removing them.
Association executives have plenty of things to be anxious about: Staffing, meetings, dues revenue, nondues revenue, boards, sponsors, and on and on. That is in large part why the CEO is typically the highest-compensated person on staff. One more anxiety to add to the list: compensation itself.
Time was, an association CEO’s compensation package often included a robust mix of salary, bonuses, and perks like flight upgrades and game tickets. As nonprofits have absorbed more scrutiny from the IRS and the general public, however, many perks are becoming less and less common. “There’s an optics issue with first-class travel, club memberships, and tax gross-ups,” Pete Smith, president of Smith Compensation Consulting, said last week at an Association Trends panel in Washington, D.C., on nonprofit compensation. (A tax gross-up is a mechanism that essentially covers the cost of the tax on the exec’s salary.)
There’s an optics issue with first-class travel, club memberships, and tax gross-ups.
A new Association Trends nonprofit salary survey discussed during the panel shows just how unpopular those perks are these days. By a large margin, the most common executive-only benefit is paid cell-phone, and less than a third (31 percent) or organizations polled say they provide it. That jibes with ASAE’s own compensation research, which shows that the glitzier perks don’t shine very brightly at associations today. Aside from covering membership dues and cell bills, few associations offer much that would be considered cushy:
- 26 percent offer a car lease/ownership allowance.
- 18 percent cover travel costs for spouses.
- 18 percent cover health or social club fees.
- 5 percent cover first-class or charter travel costs.
- 1 percent offer a housing allowance for a personal residence.
Compare that to 30 years ago. Here are some tidbits from ASAE’s 1983 compensation study:
- 75 percent of associations provided a car or car allowance.
- 48 percent covered a spouse’s travel expenses.
- 19 percent covered country club memberships. (This question isn’t even asked anymore. Thirty-two percent covered “in-town club memberships,” which may be analogous to the health and social clubs in the recent survey.)
As the product of union household and someone who still hasn’t broken the habit of rolling up his sleeves at the office, this is all fine by me; fewer skybox seats, more box lunches! But I recognize that there’s a difference between putting association executive compensation dollars to reasonable and equitable use and austerity theater. “Optics,” in itself, isn’t a compensation strategy. One point that Smith and his copresenter, Eileen Johnson of Whiteford, Taylor & Preston LLP, made during the panel is that the IRS will not second-guess your executive compensation if you’ve “done it right”—that is, benchmarked it against similar executives in the same geographic area, made it a board decision, and documented the compensation package as much as possible.
For a while now, Dan Pallotta has argued that American society is overly obsessed with overhead and executive compensation in nonprofitdom. “It’s time to rethink charity,” he wrote in Associations Now in 2009. “Time to give charity the big-league freedoms we give to business: the freedom to get the best people and pay them for the value they produce.” Ultimately, associations ought to have the best leaders in charge. That doesn’t mean the exec deserves a Bentley and an oak-paneled private conference room. But if the board is fixated on whether or not to cover plane-seat upgrades, it’s having the wrong conversation about compensation.
How do you as an executive treat these perks? Are they a meaningful part of your compensation package, or are you happy to see them fade into the sunset? Lets us know in the comments.