Three CEOs, One Consultant; Grantmaking Foundations Compensation

Posted on May 24, 2017 by in Grantmaking Foundations

By Elaine Lasnik-Broida, President, Lasnik-Broida Consultants, Inc., an Affiliate of The Croner Company

CEO Compensation in Grantmaking Foundations

Perhaps you have heard the story of five artists that were all asked to paint a tree, and how the same tree looked very different in each of the five resulting paintings. It got us thinking about how the compensation picture of a Chief Executive Officer can look very different from another depending on the organization over which the CEO presides and the priorities embraced by the organization.

We selected three of our recently completed reviews of CEO total compensation in three major grantmaking foundations located across the United States, to see how essentially the same consulting assignment resulted in three very different outcomes. Not surprisingly, while each compensation review involved the same objectives—to ensure reasonable executive compensation, conduct an independent, professional review and demonstrate due diligence to constituents—our recommendation in each case reflected the unique aspects of the foundation and its CEO.

CEO Study #1: The CEO was just two years in the position, leading an entrepreneurial operation. Working directly with the active founder, the CEO position was multifaceted, including management of the day-to-day operations, leadership on affiliated boards and direction of various startup operations. When compared to the foundation’s cohort group, the CEO’s salary was significantly below market.

We developed detailed descriptive information on the “peer” CEO positions to better inform the founder and gained approval of a significant salary increase to bring the CEO within a more competitive range. This salary adjustment resulted in a much higher likelihood of retaining the high performing top executive at the foundation.

CEO Study #2: The CEO was a seasoned top executive of a family foundation and the daughter of the founders. The foundation was anticipating a sizeable infusion of assets upon the pending settlement of the founders’ estate and the Board wanted to ensure that the CEO total compensation package would reflect the incremental growth of the foundation over a three- to five-year period. This review required sensitivity to balance the Board’s desire to increase the CEO’s compensation to reflect the increased scope of responsibilities with the perceptions of other family members and of the public. In addition, the CEO wore two hats—CEO and Board Chair.

We devoted extensive time to researching other family foundations with similar size endowments, as well as local philanthropies and nonprofits, to reflect pertinent practices and perspectives to create the first ever documented executive compensation philosophy for the foundation. In addition, to bring the CEO compensation package more in line with market, we recommended appropriate salary increases over a five-year ramp up period and replacement of a discretionary cash bonus with more competitive levels of discretionary grantmaking.

CEO Study #3: The CEO had a relatively short tenure in the position but long service to the foundation.
The Board wanted to recognize the incumbent’s outstanding performance and enhance the competitiveness of the salary component of the total compensation package. The Board had well established accountabilities and a rigorous annual performance and compensation review process in place. One of the key challenges was to reflect the local area’s more conservative executive compensation levels and practices while retaining competitiveness on a national basis.

Working with the Board, we provided various salary increase scenarios and their respective impact on total compensation. We supplemented the market data with key rankings of the peer foundations by staff size, operating budget, geographic location. These data gave the Board a deeper understanding and appreciation of the impact of their decisions and actions.

While each of the three scenarios required a solution tailored specifically to its unique circumstances, we approached the assignments all in a similar manner. We listened carefully to each foundation’s objectives and concerns, provided relevant and meaningful compensation frameworks and insight into peer practices, and partnered to develop the most appropriate recommendations in support of competitive, equitable and reasonable CEO total compensation.

From our point of view, the artistry in each study was pairing our market data and expertise with an understanding of a foundation’s own goals and desires. Each resulting rendering of the “tree”—in our case, the recommended CEO compensation—was quite different. We believe each of our three “paintings”—market-based, tailored total compensation CEO packages—was designed to enhance the ability of our clients to better achieve their philanthropic missions.

 

Find out more about The Croner Company’s Compensation Survey of Foundations.

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