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Martha Coakley targets nonprofit CEO pay

Attorney General Martha Coakley’s office is questioning the high pay of nonprofit executives.

Aram Boghosian for The Boston Globe

Attorney General Martha Coakley’s office is questioning the high pay of nonprofit executives.

Attorney General Martha Coakley vowed Thursday to order Massachusetts nonprofits to disclose more information about their executive compensation after her office determined that some of the state’s most prominent nonprofits offered their chiefs generous salaries and perks unavailable to most workers.

A survey of 25 large health insurers, universities, and other Massachusetts charitable organizations, released Thursday by Coakley’s office, found that all of them paid their leaders between $487,000 and $8.8 million a year in total compensation each year between 2009 and 2011.

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In addition to salaries, many of the organizations offered executives an assortment of other benefits, including bonuses, deferred compensation, auto allowances, financial planning, life insurance, and other considerations that are more commonly associated with corporate leaders and boosted their total pay.

In 2011, that brought total compensation of Northeastern University president Joseph E. Aoun to $3.1 million. In the same year, Partners HealthCare chief executive Gary L. Gottlieb received $2.2 million, Tufts Health Plan head James Roosevelt Jr. took in $2.1 million, and ISO New England chief Gordon van Welie received $1.6 million.

Even when executives retire, the 92-page report found, they often leave with hefty severance or consulting deals that allow them to earn millions more.

“At first glance, the salaries for many of the CEOs [are] very high,” Coakley said. “Boards should be looking more closely at these compensation packages.”

Coakley said she hoped the agency can prod Massachusetts nonprofit boards into taking a harder look at whether the pay packages are justified by requiring them to fill out a new form disclosing information about the pay packages more clearly and promptly.

It currently can take nearly two years for executive pay to show up on nonprofits’ federal tax returns.

She also noted the issue is particularly important for Massachusetts because the state is home to so many tax-
exempt hospitals and colleges.

But at least one nonprofit leader bristled at the idea of having to fill out yet another government form, arguing that charities already report abundant data.

“As a sector, we are comfortable with the level of transparency we already provide,’’ said Rick Jakious, chief executive of the Massachusetts Nonprofit Network, which represents 500 nonprofits in the state. “Frankly the amount of information that is available is the envy of any other sector.”

Coakley’s office launched the inquiry after revelations that Blue Cross and Blue Shield of Massachusetts, the state’s largest nonprofit health plan, gave two former chief executives multimillion-dollar payouts after they stepped down. William C. Van Faasen received $16.4 million in lump-sum retirement benefit in 2006, and Cleve Killingsworth received $11 million after he left in 2010, including more than $4.2 million in severance.

Blue Cross later agreed to refund the severance amount to customers after Coakley challenged the payment.

Blue Cross spokeswoman Sharon Torgerson said the insurer has dramatically scaled back the pay for its current top executive, Andrew Dreyfus, including the severance provisions in his contract.

University pay has also been a lightning rod. As the Globe reported last month, many local universities give their former presidents large exit packages or keep them on the payroll even after they quit. For instance, Tufts University president Lawrence Bacow received $1.7 million in “end of service compensation” after he retired in 2011 and Brandeis University president Jehuda Reinharz has received at least $1.2 million for part-time advisory work since he stepped down three years ago. Tufts said Bacow earned the payment over many years. Brandeis said Reinharz is providing valuable assistance to his successor.

In addition to asking organizations for greater disclosure of executive pay, Coakley’s office urged nonprofit directors to consider how compensation compares to other workers’ salaries and take into account the amount of money they save by not paying taxes.

Coakley also strongly urged boards to reconsider their severance policies.

The report suggested the severance clauses in employment contracts can handcuff boards by discouraging them from firing floundering executives and hurt the organization financially by forcing them to pay departing executives money they cannot afford.

The report said it hoped such severance deals will become less common after the uproar over Killingsworth’s golden parachute.

Still, the report did not single out any organizations for criticism.

On the whole, the report said, it found that organizations took “care and attention” to make sure the executive pay levels complied with federal rules. Most of the organizations hired outside compensation consultants or analyzed pay for leaders at comparable organizations.

Still, critics have long complained about executive compensation at some large nonprofits, arguing that it diverts money that could be better spent on the organization’s core charitable mission.

“It is a very serious concern,” said Joshua Humphreys, a fellow at Tellus Institute who has studied pay at large universities in Massachusetts and found large gaps between the highest- and lowest-paid workers. “You can attract people without paying so much money.”

Humphreys, also president of the Croatan Institute, applauded Coakley’s effort to speed up the reporting of executive compensation, noting that many of the controversial pay packages are not fully reported until years after the executive has left the organization.

“We do need much more timely information about this to hold people accountable,” he said.

Todd Wallack can be reached at twallack@globe.com or on Twitter at @twallack.
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