It Takes Big Bucks To Run a Charity

Late last year, Mike Jarvis joined the ranks of the unemployed. His job was not shipped off to India. Mr. Jarvis was the basketball coach at St. John’s University, where he was paid in the neighborhood of $700,000 a year. He got the gate, if the sportswriters are to be believed, because his team had won two games while losing four.

St. John’s is in the process of spending $23 million on a new basketball facility, so it needs to keep the revenues flowing. To do that, you must win-because, as George Steinbrenner will tell you, it’s winning that puts fannies in the seats. What all this has to do with education is best left to others to explain. Suffice it to say that Mr. Jarvis, prior to his defenestration, was the highest-paid faculty member at the university, which hints at an interesting set of priorities at an educational institution run by a religious organization.

But then again, the whole world of nonprofits exhibits signs of being badly out of kilter. Would it surprise you to learn that Shirley Ann Jackson, the president of Rensselaer Polytechnic Institute, was compensated at a rate of $891,400 in 2002, the last year for which we have figures? In addition, Ms. Jackson picked up another $591,000, plus stock options, for serving on the board of eight corporations, including such household names as the United States Steel Corporation, AT&T and Federal Express.

The rationale for allowing a university president to sit on corporate boards and scoop up all that extra moola is that she is meeting potential large donors to her institution. That may well be the case, but this is a built-in conflict of interest:

A board member with such motives for serving is going to be the kind of accommodating yes-person who will fail to stop the crooked and unethical managements that have led so many companies to grief and disaster.

Lest you think that Ms. Jackson is an unfortunate exception in the ranks of modestly compensated educational administrators, you may think otherwise when you learn that Gordon Gee at Vanderbilt University was paid $852,000, and Judith Rodin at the University of Pennsylvania was paid $845,000. Nor are eye-popping pay packages reserved for the heads of private institutions. Mary Sue Coleman at the University of Michigan must budget her expenditures to stay within her $677,500 compensation package. She also gets at least another $100,000 per annum for sitting on the boards of the likes of Johnson and Johnson.

So in the nonprofit-but not nonprofitable-world, we see the same disparities in compensation developing between the ordinary worker bees and the queen bees that is now taken for granted in the corporate world. With that comes the same perks that the corporate C.E.O.’s get: cars, private air travel, residences which might be described as palatial, retention bonuses and all the other gimmicks used to make the pay higher and move the country just that much closer to a two-tier polity in which the rich few rule the impecunious many.

The same pattern holds in the world of philanthropy and high-society culture. For example, Thomas M. Lofton at the Lilly Endowment hauls in about $1.2 million every 12 months-that’s salary and bennies both. Harold Varmus at Sloan-Kettering hasn’t quite gotten to the $2 million plateau yet, but at $1.7 million it won’t be long before he makes it. Susan Berresford of the Ford Foundation isn’t hurting too much with a total compensation package of $800,000.

These people are also compensated in praise: They are given awards, testimonials and invariably introduced as individuals who are making less money than they might have had they chosen the for-profit existence, rather than their current lives of sacrifice and self-abnegation. (Though I suppose if you are the $20-million-a-year bozo introducing Ms. Berresford, hers may indeed seem a life of self-denial.)

Some of these people earn their pay: Ms. Jackson at Rensselaer is credited with raising something in the neighborhood of $400 million for the dear alma mater. The genius at Harvard who is paid $17 million a year to manage the university’s endowments lost money-9 percent in the recent bear market-while archrival Yale made almost 4.5 percent during the same time. Hence, the relationship between performance and compensation in this world seems to be rather sketchy.

That may be a kind way of putting it: A report by Harvard’s Hauser Center for Nonprofit Organizations discloses that in the last seven years, at least $1.2 billion has been stolen or misused by top-level administrators in 152 charitable organizations. Another study conducted by former New Jersey Senator Bill Bradley concludes that the nonprofit sector is pissing away about $100 billion a year, or enough to give every high-school graduate in the country a $40,000-a-year college scholarship.

Where inefficiency, sloppiness, sloth and waste end and outright crookedness begins is sometimes hard to delineate, but there is a line, and it does get walked over. When the Red Cross pocketed the money that people gave it for the 9/11 victims, was that fraud or simply a grand misunderstanding? Well, nobody went to jail for it, which may be the rule in the nonprofit world, where it is better to let a peculator get off free with his ill-gotten gains than have a trial with the kind of publicity that scares off contributors.

The Washington Post recently unearthed a doozy of a charity scam for the already-more-than-comfortably-fixed: Go out and buy yourself a golf course, then place a conservation easement on the fairways prohibiting the erection of buildings, shops or restaurants, then give the easement to an organization like the Nature Conservancy (which is already embroiled in other scandals) and take a tax deduction for the “loss” in the property’s potential resale price. The newspaper describes one instance of an investor buying a golf course for $2.4 million and saving $4.8 million in taxes on the deal.

Since there are over 17,000 golf courses in the United States, an energetic person with piggish instincts should make nice money for himself off the people who pay their taxes. Since golf courses, with their use of pesticides and herbicides, their waste of water and their air pollution from lawnmowers, also do flagrant injury to the environment, getting a tax deduction in this way ought to be deeply satisfying to members of the raper-pillager set.

The political hyenas have already insinuated themselves into the morally porous nonprofit sphere. Congressman Tom DeLay of Texas, the House majority leader, has come up with a new wrinkle: He’s created a charitable front group, Celebrations for Children Inc., which he uses to solicit tax-exempt political contributions. The idea has apparently caught on in Republican circles, for it has been reported that at least one other politician is planning a similar racket using an AIDS charity as the front.

These last months have demonstrated how poorly the securities laws are enforced by the Securities and Exchange Commission. At least there is such a mechanism for finance and investment; nothing comparable exists in the nonprofit world, which goes its ever-more-questionable way uninhibited by outside scrutiny. On the plus side, it’s comforting to know that one can still do well by doing good.

It Takes Big Bucks To Run a Charity