Government Tries To Lead On Non-Profit Executive Compensation And Fails

I've spent a lot of time talking about and writing about leadership. It's not something that's easy. It doesn't just get turned on suddenly. It takes years to really get it right. So somehow, government on every level thinks it can provide leadership through an election process. In reality, our elections are more like a crap shoot. It's the best we've got and the electorate seems to understand that they need to clear house every once in awhile - but it's a hard process.

So what have we seen recently. Governor Cuomo is elected in New York State and starts pulling off miracles. Budget reductions, approvals, etc. The NY Times starts a series of reports that go on for a year pointing out problems in one of his largest state agencies, the Office for People with Developmental Disabilities. Cynics point out the Governor's interesting relationship with the press, with some even suggesting he provided info for the articles. They point out the Governor had no real love for this particular agency. In the process of these articles, a story gets told about some chief executives who seem to have abused the system relative to their own salaries. Of course there is outrage and like all outraged good government efforts, there are speeches, task forces, and even an executive order capping the salaries of executive directors of all non profit agencies. The devil has been found. It all plays out very well for the Governor and for the journalists. He looks real good and there's a great story to follow up on. So what't wrong with all of this. I'll take a shot.

Here are just a few quick facts. Most non profits provide services and work that government has either chosen not to provide or that government can't provide efficiently or effectively. Non profits are and always have been regulated by many government agencies. That's part of the process of how they get their non profit status. As part of it they report all of their financial information, including executive compensation, to the Internal Revenue Service and to Charity Registration agencies within state governments. In NYS that falls under the Attorney General's Office. Let's see, Andrew Cuomo was Attorney General before he was Governor and therefore had all of that information. Fact. Here's another. NYS contracts with for profit entities and there isn't any real method or effort to collect information on the executive compensation of these organizations. That would be a real eye opener. Fact - on the one hand, government wants non profits to hold down their administrative costs including executive compensation. On the other hand, part of the way they've decided to do that is to require additional financial reporting and accounting as well as other administrative requirements. So here we have it - the Governor, who was Attorney General and had all of the information he needed, sent out thousands of letters to non profits across the state and required them to not only resubmit information the state already had but to also answer a whole set of questions that are mostly covered under the requirements of not for profit law. More interesting news - the state of New York is very concerned about how non profits manage their administrative costs but can't seem to get the state's overtime costs under control. Statewide, overtime costs have risen 4.5% in the past year. This trend included increases at the Office for People with Developmental Disabilities as well as other state agencies. Some employees exceeded $100k per year due to overtime. More - coach at SUNY makes over $1million. Is it possible some values and judgement is just screwy?

So now we have a cap on salaries that state agency heads can interpret in various ways as well as public hearings and legislative hearings to try to deal with the issue. Which brings me back to where I started - leadership. This has been a fiasco. It's a dangerous road that government is traveling down. Leadership sometimes requires that people, including elected officials and executives, speak up about unpopular issues. Sometimes just telling the truth is a step in the right direction and the truth is - non profits have an important place in society, picking up where government lets some people down and where government can't put needed resources. Some people may have abused the system. They should be dealt with accordingly.