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Roundtable Discussion: Charity Leaders Speak Out About CEO Compensation, Special Events and the Economy's Impact on Giving

July 1, 2008


By rating charities we endeavor to bring greater transparency to the charitable sector and in doing so, we strive to build productive, long-term relationships between donors and the charities they support. To that end, we recently asked representatives of a variety of causes to share their perspectives on a range of philanthropic issues. Read on to find out what these charity leaders had to say about CEO compensation, special events, the new Form 990 and how the economy and presidential campaign are impacting contributions.

The Contributors

The Conversation

Charity Navigator: What, if any, impact has the presidential campaign had on your charity’s ability to fundraise?

Andrew H. Cohen

Andrew H. Cohen

Army Emergency Relief

“While we gratefully accept unsolicited donations from the general public, we’ve found those donations to be influenced more by individual and corporate desires to honor or support Soldiers and their Families for service to the nation regardless of any political views a donor may have.”

Andrew H. Cohen: There has been no impact at all. Army Emergency Relief’s focus is on “Soldiers helping Soldiers” and as such our active fundraising efforts are focused within the Army and we do not actively solicit the general public for donations. While we gratefully accept unsolicited donations from the general public, we’ve found those donations to be influenced more by individual and corporate desires to honor or support Soldiers and their Families for service to the nation regardless of any political views a donor may have.

Cindy Datig: The presidential campaign has not had an impact on Dollar Energy Fund’s fundraising activities.

Cindy Eisaman: We do not get involved or endorse any political candidate; therefore it has no impact on our ability to fundraise.

Murray Rosenblith: The A.J. Muste Memorial Institute primarily supports organizations working for peace and social justice. As you can imagine, we are heavily involved in funding the peace movement and groups working to end the wars in Iraq and Afghanistan. During the last few presidential campaigns, funding to the movement was diverted to the race for the White House in hopes that a Democratic president would embrace a more progressive agenda. This was particularly true of the 2000 election. Of course, after each of the last two elections, the general disappointment of progressive donors over the outcomes sent money back into anti-war organizing.

Interestingly enough, we have not yet seen money for the peace movement drying up. However, I suspect when the Democratic candidate is settled and the actual campaign starts up, we'll see a similar situation. My "gut" feeling for the 2008 election year is that the dearth of funding will not be as severe as in the past due to a greater skepticism about how committed either of the Democratic candidates are to ending the wars.

Branden Barber: Not anything of note, really, although we've had to make room for some of our major donors and board folks who've got political responsibilities this year. If anything it seems like it may have helped. It certainly has given us greater opportunities to learn about fundraising strategies and messaging. There's nothing like running an urgent campaign for the Earth. I think it puts a presidential campaign into perspective.

CN: In what ways has the economic slowdown had an effect on your organization?

Andrew H. Cohen: To date we have not seen much in terms of any major trends or hard evidence that the current economy is driving our assistance trends. We have seen some anecdotal cases related to foreclosures.

Cindy Eisaman

Cindy Eisaman

Community Partnership For Homeless

“With food prices skyrocketing, the lack of affordable housing and large corporate donors cutting their yearly donations in half, it has been a lot harder to raise money to support our services.” But “make no mistake; we do not have an option to fail in spite of the economic climate.”

Cindy Datig: The economic slowdown has affected Dollar Energy Fund in a number of ways. We are seeing clients approach the organization in need of utility assistance for the first time, because due to the increased costs of everyday living expenses they are no longer able to make ends meet. Many people who have never needed utility assistance are not aware of the help available. Dollar Energy Fund has intensified its outreach efforts so families who need assistance know that it is available and how to apply. Fortunately, the economic slowdown has not had an effect on our fundraising solicitations. Our current appeals have been the most successful in the organization’s history.

Cindy Eisaman: With food prices skyrocketing, the lack of affordable housing and large corporate donors cutting their yearly donations in half, it has been a lot harder to raise money to support our services. However, our mission has always been to keep the integrity of our programs to the highest standards. Over 61% of the homeless individuals who come through our Centers, find the tools needed to get back on their feet and move on to something better in their lives. Make no mistake; we do not have an option to fail in spite of the economic climate. We will persevere despite the challenging circumstances-- that’s what our organization is all about. We have set the standard and we are not willing to compromise.

Murray Rosenblith: We haven't seen much effect yet. Of course, if we were an endowed organization and dependent on investment income, we might be experiencing some funding difficulties. I expect that we will eventually see some falling off of contributions, particularly stock gifts, if the current situation continues, but it will probably lag behind actual economic events. Like many publicly funded foundations, we raise the bulk of our contributions toward the end of the year. If the slowdown is short-lived and the financial markets begin recovering by the fall, it may not have any effect at all.

Murray Rosenblith
Murray Rosenblith

A.J. Muste Memorial Institute

“Warren Buffett notes that it's almost impossible to become rich in the stock market quickly. Truly successful investors take a very long view. Social investors should do the same.”

Another point about the present economic situation is that if an endowed organization has followed a socially responsible course of investment (we do this in a very small way with our limited reserve funds), it may not experience a deep drop in income. Most of the distressed investment areas involve more speculative, less responsible instruments that fall outside of this strategy. Of course, this has dragged all markets down, but not equally.

Sally J. Petersen: Skyrocketing food and fuel prices challenge our ability to meet our goals. The generosity of our community currently enables us to meet our commitments. The increase in the price of eggs, milk, rice, beans and other key commodities will force us in the next fiscal year to consider changes to current distribution patterns and metrics. Foreclosures (the Bay area leads the nation) and layoffs convert donors into clients, increasing the demand as our ability to meet increased needs erodes.

Branden Barber: While we are concerned about this as a potential issue, it hasn't shown itself to be thus far. We are cognizant that we need to work harder than ever to ensure that we are making every effort to mitigate any downturns in funding brought on by the economic woes. But we're doing well currently. The work of the organization is strong and our outreach continues to be effective in raising our funding goals.

CN: This past year, the Form 990 underwent its first comprehensive redesign in 25 years. With the goal of improving transparency and accountability, the IRS released a draft in June 2007 that required charities to disclose more information about their operations including financial efficiency ratios, board relationships and governance policies. After many nonprofits lobbied against the new 990, the reporting requirements were watered down in the final version released this past December. Did your charity support the first version or did it press for the changes that were reflected in the final document? If you supported the first draft, why do you think so many of your peers lobbied against it? If you advocated for less detailed reporting, why? Wouldn’t more comprehensive reporting be an opportunity for well-run charities to differentiate themselves from those that are less effective?

Andrew H. Cohen: AER did not take any stance with regard to the redesign of the Form 990 nor are we in position to speak on the views of other organizations. The real question appears how does one evaluate or define a well run charity? And while there are certain core features and metrics such as the principles of good corporate governance, there are many others that don’t fit into one size fits all evaluation templates. This is further complicated by two other key factors. The first of which is the wide range of what charities do and how they operate. The other factor being not everyone agrees on evaluation methodologies. More comprehensive reporting cannot come from one single source, but rather it is the result of understanding of what and how an organization operates along with detailed and synthesized analysis from multiple sources with occasionally differing views.

Cindy Datig: Dollar Energy Fund did not support either version of the new 990. We are in favor of improving transparency and accountability, but believe that there needs to be standards established for calculating financial efficiency ratios.

Cindy Eisaman: We have always tried to strive for total transparency in how we service our clients and fulfill our mission, as well as how we spend our money. Community Partnership for Homeless prides itself on being good stewards of all donations, now matter how large or small. With that in mind, we believe the donors have a right to know everything we do.

Cindy Datig

Cindy Datig

Dollar Energy Fund

“I would like individuals to know that any donation, large or small, truly makes a difference and is greatly appreciated.”

Margaret C. Kirk: We did not take a position on the new 990, although we belong to the National Health Council, which did so. They did not oppose the new version, but did seek clarifications and re-ordering of some of the items for a variety of reasons. For example, the mission of an organization was relegated to page 10 in the first version which seemed to diminish the importance of the charitable purposes of the organization and decrease the opportunity to communicate to the public through the 990, an important public document. Another issue was that some of the ratios on page one were not applicable to all charities and did not tell the story in a way that was meaningful and/or did not allow for comment (or explanation) on the ratios. Another concern was the number of positions who were compensated over $100k—there are concerns that this information is difficult to evaluate as positive or negative in the absence of information such as the relative salaries for the positions/location, and the size of the organization. Since this is a public document, many in the sector felt that such information needs to be presented with context or meaning. Finally, many—if not the majority of—organizations will end up spending more with their auditors to complete the new form and all the addenda. A major accounting firm has estimated that more than 90% of their nonprofit clients will have to complete at least 10 of the 15 addenda. This clearly presents an additional burden, especially for smaller organizations.

We do strongly support transparency and integrity, and have already adopted many of the policies which aren’t yet required for not-for-profits.

Finally, to the last question above I would point out there are subtle differences in “detailed” and “comprehensive” reporting: details in the absence of context may only confuse donors, so we would hope that as more details are reported, forms such as the 990 should also allow for explanatory or other relevant comments.

Murray Rosenblith: We didn't have much to say about the changes to Form 990. We're a pretty small organization with a very low "overhead." In general, we feel that more transparency is better, but we're also sensitive to the demands that more detailed reporting can place on an organization with limited staff.

Sally J. Petersen: Our charity was not involved in the 990 redesign. We neither supported the first draft nor lobbied against it. We agree with you that more comprehensive reporting is an opportunity to differentiate. But the cost versus the benefits needs to be considered. Charities will be reluctant to support comprehensive reporting changes to the extent the comprehensive reporting requires costly new systems. Charities prefer to invest in their programs rather than in costly infrastructure that provides little improvement in their ability to serve. We are able to provide the additional information required in the final version without excessive cost and without the business disruption of time consuming revamping of processes and procedures.

Branden Barber: We don't have an opinion on this one. We weren't asked to support the redesign.

CN: Our research into special events --- such as galas, golf tournaments and fun runs ---shows that these activities are often inefficient in raising funds. Some charities have argued that the side benefits of these events, like cultivating new donors, take priority over generating a profit. How does your organization measure the success of a special event? Do you think it is ever appropriate to hold an event that fails to generate a profit or even loses money? In seeking corporate sponsors, have you been turned down because the firm has a policy against purchasing a table at a gala or paying to participate in a golf outing?

Cindy Eisaman: We have 2 signature events each year and I am now creating a 3rd event.

The first event is our Annual Gala Celebration. The Gala last year generated over 2.1 million dollars. This event has approximately 500 in attendance and always sells out at least 3-4 months in advance.

The second is our Celebrity 5k run, which generates funds and allows for the whole community of Miami Dade to come together for the homeless cause. We have 3,000 runners in attendance. We are in the fourth year of holding a benefit running event and since their inception they have generated over 1 million dollars.

Sally J. Peteren

Sally J. Petersen

Second Harvest Food Bank of Santa Clara and San Mateo

“We have moved away from golf tournaments and galas and have moved in the direction of holding primarily mission focused events. We find that our donors prefer participating in food sorts or going out on distribution visits, instead of attending an expensive dinner where only a small percentage of the proceeds are returned to the Food Bank.”

As a rule we only hold events that generate a profit; however we have had events to thank volunteers, sponsors and donors. These events are either low in cost or are completely no cost to us at all. For instance, we just had a thank you lunch for 100 people on a cruise ship. Everything was completely donated.

We have run across some corporations that have a policy that stipulate they cannot use funds to buy a Gala table, but not to many. Our gala tables’ sales are matched and our donors are pleased that their $25,000 table donation will turn into a $50,000 table thus maximizing their donation.

Margaret C. Kirk: Our organization definitely feels that the funds from such special events are worth it. We always have as a goal to keep our expense ratio at under 25% (and usually do better than that). We recognize that events can require significant start-up costs, but those expenses do tend to even out over the course of the event's lifespan, while the opportunity to increase in event revenues (and net results) can grow significantly. We also find that raising funds and raising awareness go hand in hand, as they give us a wonderful opportunity to communicate what important services we provide.

Events also offer a great opportunity for in-kind partnership, including media sponsorships, celebrity partnerships and so on, which can open doors to a broader reach than the organization might have without the event. One important advantage of such events—from galas to walks to golf outings—is that they offer a way to appeal to, and involve, people (and companies) that the charities may not have had the chance to connect with before. Once the connection is made, we work to solidify and expand the relationship.

At BREAST CANCER NETWORK OF STRENGTH, we measure the fundraising events based on their performance to raise funds, but also to deliver on peripheral objectives, including raising awareness and building our database. As an example, here in Chicago, BREAST CANCER NETWORK OF STRENGTH hosts a Mother's Day Event, the Race to Empower. This event is the largest cause-related event in the city, and we have more than 30,000 registered participants that raise nearly $5 million to fund our services, which are all free of charge. This event is definitely big, fun and raises a tremendous amount of money and delivers significant ROI—both for BREAST CANCER NETWORK OF STRENGTH and for those who participate (attendees and sponsors). Expenses are not significantly different than if we hosted half that number of people, but with more than twice the impact.

Branden Barber

Branden Barber

Rainforest Action Network

“We are cognizant that we need to work harder than ever to ensure that we are making every effort to mitigate any downturns in funding brought on by the economic woes.”

To the question about whether or not to continue conducting an event, even if it is not profitable, it probably depends on a number of variables. In the beginning of a new event, there should be a solid plan to become profitable, as with any business venture. There should be solid objectives to evaluate the event from start to finish. If, in spite of the clear expectations, good intentions and defined outcomes, the event doesn’t deliver, then it’s best to re-evaluate, and maybe start over with another plan. It is important to recognize the difference in a “fundraising” event and an “awareness” or “P.R.” event. If an event’s primary goal is fundraising and it breaks even or loses money (with the above-mentioned exception of start up events), we would not continue it.

We have been turned down by a few sponsors due to their policies. However, that type of response is typically received when it is a “cold call.” We don’t usually get that type of response when we’ve done our homework and have done a good job asking the right person and matching their stated objectives with the assets we offer. In recruiting sponsors, we believe an important part of our job is to identify what our assets are, and then figure out how to leverage them for our sponsors to fit in with their goals, and ultimately, connect them with the consumer (if that is one of their main goals). Of course, a part of doing this is to understand what their goals and objectives are!

We have tried to take the approach of thinking long term, looking at our existing corporate partners, our board's connections, major area employers, and emerging categories, and then focus on retaining existing sponsors—we are most interested in long-term partnerships that mature and evolve over time, so that we grow together.

Margaret C. Kirk

Margaret C. Kirk

Breast Cancer Network of Strength

“It is important to recognize the difference in a fundraising event and an awareness or P.R. event. If an event’s primary goal is fundraising, and it breaks even or loses money, we would not continue it.”

Sally J. Petersen: We agree that special events are not always the best use of our time, talent and resources. Second Harvest Food Bank is committed to making sure we properly steward our supporter’s gifts. In fact, .96¢ of every $1 donated goes to fund programs, food purchase and services. We use this 4% administrative cost as a benchmark in deciding how to direct our fundraising efforts.

As a rule, the events we hold take place in donors’ homes or at one of our warehouses to avoid venue related fixed costs. We have moved away from golf tournaments and galas and have moved in the direction of holding primarily mission focused events. We find that our donors prefer participating in food sorts or going out on distribution visits, instead of attending an expensive dinner where only a small percentage of the proceeds are returned to the Food Bank. We do, however, encourage community groups and our supporters to consider us as the beneficiaries of events that they hold, which provides us with both increased public awareness and financial support, without our needing to have staff members shepherd the event from cradle to grave.

We have received feedback from some of our corporate supporters that they do not sponsor events or event related costs. We offer corporations various opportunities to sponsor our programs so a corporate policy against galas or golf is not a barrier to sponsorship, for us.

The overriding, guiding principle of our development office is “how can we put our donor’s resources to work for the fulfillment of our agency’s mission.”

Branden Barber: We measure the success of an event in two ways: (1) did we raise our target dollar amount or exceed it and (2) how many people did we introduce to our work and how many of our old friends participated?

Special events are great cultivators if they are done with heart and are well produced. If people have a good time around an organization's mission, so much the better for the organization. It's very important to prepare for follow-up at the event by capturing as much information as possible from all guests. It's also important to make sure that guests are informed both of your work, and the need for funds to support the work. If a guest doesn't give on the day, they may give in the future. This is your first chance to make a good impression with many and a chance to connect with folks who've been supporting the work previously.

We don't think it's okay to have an event that loses money. We can't afford to do that. But a small event can pay back great rewards on the night or in future. A small house party can generate $65,000 if you're lucky. A big event may net $250,000. But at the end of the day, not losing money and connecting people to your mission are great reasons to hold events. You should, however, be able to create a good return, and we generally do here at RAN.

And RAN doesn't do corporate sponsorship, as a rule.

CN: One of the more common and controversial conversations occurring on our site involves CEO Compensation. How does your charity set your leader’s pay and how do you justify it to donors who see it as inflated?

Margaret C. Kirk: We haven’t heard from any donors that they see the CEO’s salary as inflated. If we did, I believe we would respond with the information about how the salary is evaluated and reviewed. The Executive Committee and/or officers of our board do a yearly evaluation of the CEO’s performance, which includes a review of compensation. As comparative data, we consult several national nonprofit compensation reports. This comparative data is reported based on a number of factors that include type of organization, budget size, geography, title/position summaries, total number of employees, and years in the position.

Sally J. Petersen: The Governance Committee of the Board performed the annual evaluation of the CEO. The Governance Committee also consulted with the Director of HR regarding appropriate and reasonable compensation. The Director of HR provided five sources to compare against the proposed CEO compensation. After gathering the facts, the Committee recommended the current compensation. Per the five sources provided by the Director of HR, the current CEO salary is reasonable. The Audit Committee reviews the process and the recommendation and finalizes and approves the CEO compensation. Should a donor question the salary, we would explain that the salary was determined to be reasonable through careful analysis and evaluation, and we would describe our process.

CN: If you could change the giving habits of individuals, what would be the number one change you'd like to see?

Andrew H. Cohen: Ask more questions – not only of the charity, but of those who report on them. I recently received a call regarding a statement published in a newspaper about AER. When I explained the facts and offered to provide the documentation (ironically our Form 990), the reply was a shocked “you mean the Times is wrong?”

Cindy Datig: Dollar Energy Fund relies on the generosity of neighbors helping neighbors. We are able to help thousands of families each year because many of our donors donate one or two dollars a month. I would like individuals to know that any donation, large or small, truly makes a difference and is greatly appreciated.

Margaret C. Kirk: This is a thoughtful, but difficult, question. I suppose any of us who work in this sector could easily say we want individuals to be more generous, but, in fact, we live in a very generous society. We know that stewardship is an important key to success, and while that stewardship is our responsibility as the recipient of donor dollars, I would love to see individuals recognize (and therefore be open to) our desire to understand the donor’s interests, concerns, and ways in which they would appreciate hearing from us. We are ultimately after true engagement, but understand that different donors want to be engaged in different ways. Similarly, different donors may have preferred methods of communication or solicitation and we encourage them to be proactive about letting us know their desires.

Murray Rosenblith: As a foundation administrator and as an individual donor I would like to see people make a more long-term commitment to supporting those groups whom they feel are advancing the social agenda in which they believe. Effecting major social changes in our society is a very long term project. Those of us working for peace have been working on our agenda for thousands of years! My experience with both institutional funders and individuals is that trends often win out over consistency in focus. Warren Buffett notes that it's almost impossible to become rich in the stock market quickly. Truly successful investors take a very long view. Social investors should do the same.

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