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Schubart: Adequate Compensation

07/06/11 7:55AM By Bill Schubart
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(HOST) According to commentator Bill Schubart, who has worked in the for-profit sector and volunteered in the nonprofit sector for forty years, overcompensation of many business and non-profit leaders and executives nationally is hardly a problem in Vermont. In fact, he suggests that the real problem is arguably quite the opposite.
 
(SCHUBART) According to The Washington Post and other sources, executive compensation at the nation’s largest firms has quadrupled in real terms since the 1970’s even as pay for 90% of Americans has been flat. In 1975, the top tenth of one percent earned 2.5% of the nation’s income, including capital gains. By 2008, that share had quadrupled and stood at more than ten percent.
 
To bring this home, executives at Dean Foods earn ten times what they earned in 1970 while their average workers earn 9% less for the same period. Meanwhile, Vermont farmers who supply the Dean enterprise have, until recently, been selling their milk for less than the price of production. Executive compensation in America is an international embarrassment. We go about the globe selling our principles of democratic equality while allowing some executives to loot their own businesses and stockholders here at home.
 
Recent news reports indicate that Vermonters, too, feel their business and nonprofit executives are overcompensated. But are they? We all feel more secure singing in a chorus than singing solo, but let’s look at reality.

I’ve lived in Vermont for 65 years and have earned everything from minimum wage to an average Vermont CEO’s salary. I’ve spent my adult life volunteering in the nonprofit sector and have seen nonprofit leadership salaries ranging from $36,000 to $1M a year and have yet to see an overcompensated executive in that sector. Mostly, I have seen the opposite.
 
When I chaired the board at Fletcher Allen, I helped negotiate the compensation for departing CEO Dr. Melinda Estes in 2003 and again in 2005. She earns $826,000 plus a potential performance bonus of $245,000 but only if she achieves certain quality and financial goals set by the Board. Here's why I think the amount is right. ... "

Aside from the State itself, Fletcher Allen is the largest nonprofit, or for that matter, business enterprise in Vermont. The immense complexity of a 6800-employee enterprise that arguably has a direct and personal impact at some point on the lives and wellbeing of most Vermonters and many New Yorkers is a massive challenge. Dr. Estes came to Vermont from the Cleveland Clinic when Fletcher Allen was mired in a criminal scandal. The Board set her compensation at the national median for Academic Medical Centers of similar size in order to attract the kind of leadership that was needed for its own recovery. There are CEOs of private businesses in Vermont who earn considerably more than Dr. Estes running much smaller and less complex businesses.
 
So let’s think about compensation for Vermont business and non-profit leaders. I have worked in both sectors extensively and have yet to see compensation excesses here even approaching those in the rest of the country. In fact, I have seen much the opposite. I have seen earnest, hardworking people making a difference in the quality of our lives, usually at well below market rates. Vermont’s challenge is neither unemployment nor overcompensation; it’s under underemployment and under-compensation.

(TAG) You can find more commentaries by Bill Schubart at VPR-dot-net.
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