Nonprofits Push Back Against Limits On CEO Pay

Nonprofit groups pushed back during a hearing today in Albany on Gov. Andrew Cuomo’s proposals to combat excessive pay for top executives, saying the plans would do little to root out what they insist are rare cases of abuse.

Last month, the governor issued an executive order setting a $199,000 cap on state funding for executive salaries, while also requiring that 75 percent of state dollars are spent on actual services, not administrative costs. State agencies have three months to comply with the order.

The order came after a New York Times article last August, which detailed the story of two brothers who made close to a million dollars a year as top executives of a New York nonprofit for the developmentally disabled.

But at the hearing, James Lytle, a partner at Manatt, Phelps and Phillips, which represents more than a dozen nonprofit organizations, testified before the Senate Committee on Investigations and Government Operations that it made no sense to have a one-size-fits-all limitation — a cap he argued would hurt non-profit efforts to recruit qualified executives.

“No evidence has been advanced by anyone so far that would suggest that these abuses are either widespread or particularly unpunished when they have occurred,” Lytle said.

Nonprofit representatives acknowledged that some CEOs receive extravagant pay and benefits, but said the governor’s order wouldn’t change much, since the big players would use their influence to get waivers or shift pots of money around to minimize the impact.

Doug Saur, the CEO of the New York Council of Nonprofits, said that million-dollar executives wouldn’t see any changes because the state isn’t capping salaries, just how much state money can go into those salaries.

“That’s an accounting issue,” he said. “Who’s going to get hurt are the community action programs or some of the smaller organizations that don’t raise a lot of money, that are mostly government funded, and there are no alternative sources to go and do that.”

Those testifying from the non-profit world said that setting a specific limit on the state’s contribution to executive salaries fails to take into account the multiple factors that go into determining annual pay, from the size of an organization’s budget to the complexity of its structure, to comparable salaries for similar private sector jobs.

“None of the conversation today has been about performance,” Saur said.

Some lawmakers suggested other remedies to the abuses besides the Cuomo-imposed cap. Sen. Carl Marcellino, who chairs the Investigations Committee, said another solution was to demand greater accountability from the boards of nonprofit entities, which in some cases are made up of family members or appointees of the chief executive.

“It’s been my experience with a lot of these governing boards that a lot of the membership is appointed by the CEOs of the organizations themselves,” said Marcellino. “In many cases, they’re just rubber stamps.”
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