By ANN RICHARDS
Executive and trustee compensation levels have long been of interest to Terry Odendahl, a member of the advisory committee for What Drives Foundation Expenses & Compensation, the first large-scale, long-term, systematic study of independent, corporate, and community foundations' expenses and compensation patterns and the factors behind them.
A joint project of the Urban Institute, The Foundation Center and Guidestar, results of the three-year study were published in early 2008, with major support from the Mott Foundation. The study, and the 87-page report, were undertaken to inform foundation practice, public policy debate, government oversight and sector self-regulation.
"There's a paucity of good data on executive and board compensation in the foundation field," said Odendahl, who has co-written several books on philanthropy and currently serves as president of the New Mexico Association of Grantmakers in Santa Fe.
"This new research is much more thorough than previous efforts," Odendahl continued.
"Back in 1990, my first book dealt with compensation levels in the field, but this new research enables the field to take a good, hard look at its practices. I'd like to see more of this type of self-scrutiny in the future."
"The field needs to be more transparent -- this report absolutely serves as a step in that direction."
Foundation expenses and compensation were hot-button issues in 2003, according to Elan D. Garonzik, former Mott Foundation program officer who now is vice president of programs for The ELMA Philanthropies Services (U.S) Inc., in New York City.
"Nonprofit, and subsequently, foundation compensation was the focus of several media investigations that brought the issue to the attention of the Senate Finance Committee," Garonzik said.
"There was a real possibility that the activities of a few foundations would tarnish the field," he continued. "Mott green-lighted funding to document the administrative expenses and staff compensation of the country's 10,000 largest foundations in part to determine whether the media examples represented a few bad apples or the whole barrel."
Garonzik discovered that no one institution tracked executive and trustee compensation. However, three Mott grantees -- the New York City-based Foundation Center, which maintains the most comprehensive database on U.S. grantmakers and their grants; GuideStar, a public charity located in Williamsburg, Virginia that provides information on over 1.5 million charitable institutions through its database, and the Urban Institute, which has developed a platform to support e-filing for nonprofits, the NCCS 990 Online system through its National Center for Charitable Statistics -- each held "a piece of the puzzle."
"The challenge was merging the three databases and ensuring the data was clean," Garonzik said.
Ultimately, the study used individual-level compensation data reported by the IRS (Internal Revenue Service) for officers, trustees and key paid staff to determine executive and board member compensation. All three partner organizations provided financial and programmatic data from IRS Forms 990 and 990-PF. The Foundation Center collected additional survey data.
Although Mott was the initial funder, the Ford Foundation also provided major support for the project. The California Healthcare, W.K. Kellogg and Rockefeller foundations provided additional funding.
Originally conceived as a one-year research project, the report ultimately collected data from 2001, 2002, and 2003, the latest years for which information on charitable administrative expenses were available.
Responsible for 78 percent of all foundation giving and 77 percent of all foundation assets, the country's 10,000 largest foundations are a dissimilar group of funders, according to data examined by the study. About 70 percent of these foundations did not employ staff, but among those that did, size, number of staff and staff-intensive activities tended to increase cost ratios. The report also discovered that foundations incur various types of administrative expenses that are not captured well by Form 990 PFs. The enormous diversity in foundation structures, resources and operating characteristics had significant effect on expense levels.
Most foundations do not pay board members, although this type of compensation likewise is influenced by the type and size of the foundation and the complexity of its programs.
"One of our members recently asked me about appropriate compensation levels for trustees," Odendahl said. "He has a hard-working board that supplements a small paid staff and he needed some comparison data to determine what was appropriate. I was able to give him the report, along with some other materials that helped him get a balanced picture."
If the foundation field is serious about self-regulation, it is essential that more research on its practices be undertaken and made widely available, she said.
"Over the long term, that is one of the benefits of the study," Garonzik noted. "It has helped establish bandwidth of what should be the norm for expenses according to foundation personality and characteristics -- international grantmaker or targeted local funder, staff size, grant budget size, and so on. It has helped create parameters to guide the field."
Although the study is not being extended, the Foundation Center will continue to collect expense data from the largest 2,000 foundations in the country.