Legitimate Questions about Governance at a Foundation Deserve Answers

Serious questions about governance structure and compensation have been raised about the Otto Bremer Foundation. The foundation has about $800 million in assets, according to Foundation Center, and is located in St. Paul Minnesota.

In a June 26 letter to Minnesota Attorney General Lori Swanson, National Committee for Responsive Philanthropy Executive Director Aaron Dorfman questions a move by the board of the foundation to name three of its board members co-CEOs. “The move is especially dubious because their compensation has increased by more than 1000 percent in less than ten years, totaling nearly $1.2 million in 2012,” Dorfman writes.

Indeed, the Foundation’s 2012 form 990-PF, available on Guidestar, lists four compensated board members (including the three now apparently acting as co-CEOs): the lowest paid among them earned nearly $190,000; the highest made $453,000. Although board members are listed on the 990-PF as working 35-40 hours a week, it’s hard to understand why that would be the case given that also listed for that year is the now-departed executive director, whose compensation was $307,000 (which is itself a fairly typical level for a CEO of a foundation of this size).

As Dorfman notes, these pay levels for board members are way outside of what is typical of those foundations that choose to compensate their board members. And then there is the question of who sets the compensation?! A spokesman from a PR firm retained by the foundation is quoted in an article in the Minneapolis Star Tribune justifying the pay as warranted given the foundation’s structure as a bank holding company and investment manager. Dorfman is quoted in the same article expressing what seems to me to be understandable skepticism about this explanation.

I have worked closely with many foundations over the past 13 years, and I know from that experience that the overwhelming number of foundations approach their work with very high levels of integrity. Most of the hundreds of foundation board members and CEOs I have interacted with possess a keen awareness of their responsibilities and ethical obligations – and they take them very seriously. Foundation boards set pay for their CEOs based on market data and, in the cases in which the board members themselves are compensated, that compensation is typically modest.

This is precisely why it’s crucial that more answers are provided by the Foundation. It would be a shame if this very anomalous situation tarnished the reputations of peer foundations or the broader nonprofit sector.

Much has been said about transparency in philanthropy in recent years and, indeed, the public availability of form 990-PFs, via Guidestar, is what makes it possible to raise these kinds of questions. The Foundation’s structure does appear to be unique in a host of ways and I’d be the first to concede that there is no one-size-fits-all structure for foundations. If there is a legitimate reason to have three highly-compensated co-CEOs – and admittedly it’s hard to imagine that there is – the Foundation should make that clear. It should do so through a communication on its website rather than directing inquiries (as I understand it has) to a PR firm.

Questions should be welcomed, not feared, by those who are acting in good faith.

Phil Buchanan is President of CEP and a regular columnist in the Chronicle of Philanthropy. You can find him on Twitter @PhilCEP.

 

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