Aspen-area nonprofit leaders take six-ﬁgure salary hikes
September 24, 2012
Editor’s note: This is the first part of a two-part series examining compensation of executives of Pitkin County-based nonprofits. Today’s story looks at executives whose pay increased by six figures since the middle of the decade. The second part, to run Tuesday, reviews the salary packages of some of the area’s other best-paid nonprofit executives.
Executives at four Pitkin County-based nonprofits saw their compensation packages increase by six figures since the mid-2000s, based on tax returns filed by the organizations.
The biggest pay raise belonged to Heidi Zuckerman Jacobson, who’s the CEO, executive director and chief curator of the Aspen Art Museum. The last available tax return for the museum, from the 2009 tax year beginning Oct. 1, 2009, and ending Sept. 30, 2010, showed her total compensation package to be worth $569,048.
Salary packages for Houston Cowan, CEO of Challenge Aspen in Snowmass Village; Amory Lovins, chief scientist and co-founder of the Old Snowmass-based Rocky Mountain Institute; and Kris Marsh, executive director of the Aspen Valley Medical Foundation, all swelled by at least six figures, as well. The four executives’ compensation packages were compared with their salaries as reported by The Aspen Times in a June 2007 story. In that story, the Times looked at the 25 best-paid nonprofit employees in Pitkin County.
The pay hikes sit against a backdrop in which both the private and public sectors have limped through the Great Recession with budget cuts as layoffs and wage freezes, among other things. A number of Pitkin County nonprofits also have trimmed their expenses, while some have seen increased revenues during the economic downturn.
That’s the case with the Aspen Art Museum, the nonprofit said in reply to several questions by the Times.
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The expense budget for the Aspen Art Museum, which will relocate from its 590 N. Mill St. spot upon the completion of a new $30 million building at the corner of Hyman Avenue and Spring Street, has “grown by over 100 percent during the same time frame (2005 to 2012), with revenues exceeding expenses each year,” said Jeff Murcko, the museum’s communications director.
Murcko said Zuckerman Jacobson’s salary correlates with the museum’s growth.
“It is important to note the significant increases in operational capacity achieved during Heidi’s tenure,” he said. “Overall, the museum’s assets have grown by 1,288 percent between 2005 and 2012 (currently assets are reported at $37,857,015).”
Records also show that in the 2009 tax year, the museum generated $2,355,502 in contributions and grants, compared to $1,767,624 the prior year.
Murcko declined to go into detail about Zuckerman Jacobson’s contract. And Zuckerman Jacobson, who was offered a chance to be interviewed for this story, did not directly respond to questions about her pay.
“The specifics of her annual contract are confidential and are negotiated by a Compensation Committee of the AAM Board of Trustees,” Murcko wrote in an email. “This Committee reviews industry standards to structure the contractual agreement between the museum and the CEO, Director and Chief Curator (Heidi serves in all three capacities). Heidi’s base salary is at the mean for compensation at comparable museums.”
As such, Zuckerman Jacobson reaped the biggest gains, among nonprofit executives researched for this story, since the mid-decade. She drew a salary of $444,875 – that included a bonus of $180,000 – for the 2009 tax year. Also included in her package were $108,313 in deferred compensation, $15,860 in nontaxable benefits and $500 under the tax return’s heading of “other reportable compensation.” For the 2008 tax year, Zuckerman Jacobson’s package was worth $541,708; in 2007 it was valued at $510,755.
While Zuckerman Jacobson drew more than a half-million dollars in total compensation those years, she earned just half that amount in the 2006 tax year – $249,453. At one point Zuckerman Jacobson, who joined the Aspen Art Museum in July 2005, had a salary of $164,035, records show.
Based on just her 2009 package, Zuckerman Jacobson has experienced an earnings boost of more than $400,000 since she arrived in Aspen. The 2009 tax return also shows that she previously received separate board-approved loans of $70,000 and $120,000 from the Aspen Art Museum, the larger amount a “loan to purchase a residence.” The home loan carried a balance of $36,000 as of the 2009 tax year, records show.
Asked about the loans, Murcko said the “museum and its board of trustees have a long history of assisting employees with living expenses in Aspen.”
One nonprofit watchdog organization, however, said lending money to employees should not be a nonprofit’s function.
“Charities are not in the business of giving loans to their CEOs,” said Sandra Miniutti, vice president of Charity Navigator, which is based in Glen Rock, N.J. “We would like to see a CEO paid a reasonable and competitive salary, but we don’t see why a charity should be giving out loans.”
Even so, Miniutti noted, “It’s not against the law. But we generally recognize it as not being the best practice.”
Charity Navigator currently is conducting research for its seventh CEO Compensation Study, scheduled for release in August 2013. Its most recent CEO Compensation Study, released in August 2010, scrutinized executive pay at 3,005 mid- to large-sized nonprofits in the U.S.
That study showed that in 2008 in the Mountain West, of which Pitkin County belongs, executives earned a median salary of $108,000, the lowest of the seven regions surveyed. The median salary for the entire survey was $147,273. Nationwide, the median executive pay for the arts, culture and humanities sector was $190,550. Executives in the education field were the most handsomely paid, with a median salary of $272,645, the report says.
“While there are nonprofit salaries that we would all agree are out-of-line, it is important for donors to understand that since the average charity CEO earns roughly $150,000, a six-figure salary is not necessarily a sign of excessive pay for a mid to large sized charity,” reads the report.
In its survey, Charity Navigator gave the Aspen Art Museum a two-star rating out of a possible four.
The score was based on the museum’s finances, for which it received two stars, and accountability and transparency, for which it received three – the combination resulted in a two-star overall rating.
Miniutti also said that the museum’s $718,507 in fundraising expenses, along with its total contributions of $2.35 million in the 2010 tax year, showed it “cost them 30 cents to raise a dollar. At most charities it’s only 13 cents.”
While it once did, Charity Navigator no longer puts significant stock into how much an executive’s pay accounts for the nonprofit’s total expenses for a year.
For example, Zuckerman’s salary and bonus of $444,875 comprised 14.23 percent of the Aspen Art Museum’s total expenses of $3.1 million for the 2009 tax year.
Lovins earned $366,353 in salary and bonuses for the 2010 tax year, equating to 3.25 percent of the Rocky Mountain Institute’s $11.2 million in total expenses.
Marsh’s $221,555 salary accounted for 8 percent of the Aspen Valley Medical Foundation’s total expenses of $2.8 million in 2010.
The fourth executive seeing a six-figure raise during the recession, Challenge Aspen’s Cowan, drew a salary of $243,310 for the 2010 tax year, equating to nearly 16 percent of the nonprofit’s $1.7 million in total expenses.
“We have found that at smaller charities, the CEO’s compensation could be a bigger chunk of the expenses,” Miniutti said. “It’s more important to look at what the pay is by geographical location and the (nonprofit’s) mission.”
Likewise, another nonprofit watchdog, Washington, D.C.-based GuideStar USA Inc., in its “What You need to Know About Nonprofit Executive Compensation” report from 2011, notes that “The IRS has no standard formula, such as percentage of total revenues or expenses, for determining compensation, nor are there any tables or schedules that define fair and reasonable compensation for an organization.”
The IRS has the final say on what is appropriate pay for nonprofit employees. The key language the IRS uses is “fair and reasonable” compensation for tax-exempt organizations.
The onus is on the nonprofits to determine the market rate for their executives by reviewing what someone at a similar-sized charity or for-profit business, with a like-minded mission, would earn.
For his part, Challenge Aspen’s Cowan said that his 2010 salary “is comprised of part annual salary that I receive monthly and a one-time part non-salary board discretionary funded, taxable retirement plan.” Challenge Aspen’s tax form also said that Cowan tallied an average of 60 hours of work a week compared with the 40 hours reported for Lovins, Marsh and Zuckerman Jacobson on their Form 990s.
Cowan noted that “no percentage is ever used to calculate any salary or compensation plan for any employee.” Charity Navigator did not grade Challenge Aspen in its 2010 report.
At one point, the Rocky Mountain Institute’s Lovins, heralded by Time magazine in 2009 as one of the 100 people “who most affect our world,” pulled a salary of more than $1 million for the 2007 and 2008 tax years, Form 990s show. For the 2010 tax year, his compensation package was worth $376,314. In the mid-2000s, Lovins, who in 1982 co-founded the nonprofit, was making $160,833.
But those seven-figure packages from 2007 and 2008 are misleading, the institute said in response to email questions. That’s because the nonprofit had to twice report Lovins’ lump-sum distribution of $700,000 for those two tax years even though he received the payment just once. The duplicate reports were because the IRS changed its compensation-reporting requirements, resulting in the overlap.
“Because of this new requisite, we had to report Mr. Lovins’ one-time lump-sum distribution for a second time,” said Michael Potts, CEO and president of the institute. “Consequently, this total, $700,000, was reported in sequential tax periods, 2007 and 2008.”
Charity Navigator gave an overall rating of three stars to the Rocky Mountain Institute – two stars for its finances and four for its accountability and transparency.
Potts said that in 2007-08, the Rocky Mountain Institute hired a certified compensation professional, along with legal counsel, to analyze Lovins’ retirement benefits and compensation.
“Based on past compensation during his tenure to that point (1982 to 2008), an analysis indicated that Mr. Lovins had received compensation well below market value and with no deferred component,” Potts said. “In order to estimate a reasonable amount of supplemental retirement compensation, calculation showed the additional compensation Mr. Lovins would have received if his total compensation had been closer to the market to be approximately $1 million.
“The study found this figure represented a conservative estimate of the total amount of additional compensation had he been compensated at market.”
That led the Rocky Mountain Institute’s executive committee to approve the lump-sum distribution of $700,000, which was paid to Lovins in May 2008, as well as a deferred payment of $300,000, which he receives when he turns 65, Potts said.
Marsh said her salary grew, in part, because of the 2010 creation of the Aspen Hope Center, a facility with an emphasis on suicide prevention, along with her “leadership for development of the Continuing Care Community, in-depth strategic planning and preparation for hospital capital camping, and top performance in all other duties.”
The foundation’s executive committee meets annually to assess Marsh’s job performance, she said.
“My base salary can be increased by a cost-of-living adjustment, and if my performance is determined to be exceptional, I am eligible for a bonus up to 30 percent of salary,” she said.
The Aspen Valley Medical Foundation was not graded by Charity Navigator in its 2010 study.
A fifth nonprofit executive would have joined Cowan, Lovins, Marsh and Zuckerman Jacobson in the four-figure-raise category, but the Aspen Institute, which has a strong presence in Aspen, is based in Washington, D.C. Its CEO, Walter Isaacson, had total compensation at $816,243 during the 2010 tax year. For the 2005 tax year, the renowned author and journalist earned $450,003 for his work at the Institute.