The Nonprofit 1 Percent
Scott Schafer; ImageSource / Corbis
When music therapist Debbie Moran was notified she was being laid off from her job with the Jewish Guild for the Blind, her first concern was not the money.
"Me being let go is nothing," she wrote in an e-mail. "The salary was minuscule."
Moran's final paycheck was $165.07 for two weeks, and while she noted "it's sometimes a little more," the gig had no benefits and brought in less than $5,000 a year. It was but one of several jobs Moran hustled up to eke out a living as a musician, therapist, and teacher.
More: Read our follow-up series:
Part One: Karaoke For The Blind? Jewish Guild For the Blind Thinks Client's Vision Problems Make Her Mentally Deficient
Part Two: Jewish Guild Cancels Music Event, Lies to Elderly About Why
Moran had been at the Guild for more than 20 years and worked with mostly elderly blind people, forming various choirs. She was at the Guild nursing home five days a week until it closed; then five days a week at the GuildCare Adult Day Center in Yonkers, and then three days.
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Then came word that her program and the GuildCare choir were being axed entirely. "I am in shock but most of all horrified for my people," she says. "They have nothing. They are old, poor, and on top of that, blind. They are totally dependent on Medicaid."
Some had lost their sight entirely. Others with dementia were losing their memories. And now even the day care residents were losing music therapy, which could be, as Moran puts it, "sometimes the one thing that can draw someone out."
Neither Moran nor Maria Claro (who made $38,000 a year), an outspoken aide laid off around the same time, seemed surprised that their salaries would fail to register with the Guild, whose revenues (including affiliated organizations) can go into the hundreds of millions.
At the other end of the pay scale at the Guild, it's a different story. In 2008, the Guild was paying its CEO, Alan Morse, J.D., Ph.D., a total compensation package of $843,502. Then came 2009, the first full year after the financial crash, which compromised the Guild's revenue streams.
Instead of going down that year, however, Morse's compensation went up some 82 percent, topping $1.5 million.
Although he runs a nonprofit, Morse is comfortably in the 1 percent that Occupy Wall Street has made everyone so much more aware of.
In fact, if you use The New York Times' "What Percent Are You?" interactive tool, you'll see that Morse was in the top 1 percent not just nationally, but also in the higher-earning New York metropolitan region, even before his big raise in 2009.
In the nonprofit world, things don't turn out to be so different than in places like Wall Street.
Founded in 1916 as the New York Guild for the Jewish Blind and granted tax-exempt status in 1941, the organization's name was changed to the Jewish Guild for the Blind in 1960.
A February/March 2011 article in The Jewish Daily Forward described Morse as the "head of a charity ranked among the fastest-growing in the nation." It also described the Guild as a modern, nonsectarian organization.
At the Guild day center in Yonkers the Voice visited, most of the residents were black and Hispanic, and they were putting on a gospel concert. A Guild newsletter features a visit from Santa Claus at another center.
"We are a healthcare organization, the largest of our kind in the country, and not a Jewish Federation or social agency," Morse told the Forward in an e-mail. (Through the Guild's PR office, Morse did not respond to repeated interview requests from the Voice, nor to detailed sets of specific, e-mailed questions.)
Like many nonprofits, the Guild's financial model is largely based upon receiving government funds in exchange for executing government contracts (in this case, getting Medicaid in order to facilitate services for the blind).
Or more simply—as several people who have worked there have put it—it's a "Medicaid cash cow."
Before the recession, when Medicaid funding was relatively flush, such nonprofits had incentive to get as many client contracts as possible. According to the Forward, the Guild had grown to 560 employees by last year, with locations in New York, Massachusetts, and Florida.
In addition to centers in New York City and Yonkers, the Guild operated a nursing home in Yonkers until 2009, when, according to employees there at the time, "it was no longer profitable."
"It was terrible," Moran says, when the home was closed, and the blind residents were moved to other facilities. "Imagine you are blind. Knowing where everything is is extremely important. And to lose that, at the end of your life . . ."
In a September 2011 article, the New York Daily News reported that "Michael Henderson, who once oversaw the guild's procurement, claimed he was fired in 2009 after complaining about irregularities. Henderson said the guild spent $100,000 on imported furniture for Morse's part-time White Plains office and he claimed another officer pocketed $100,000 from the sale of guild property."
The Voice could find no court record of any such suit ever being filed. The Daily News says the suit was settled in 2011 and that Henderson died of cancer that same year. Colleagues who worked with Henderson allege that he was fired with the Guild knowing how serious his illness was.
The Guild's day center in Yonkers is located in an industrial park near the Hudson River. Its clients, with various levels of vision, hail from the Bronx and Westchester County, many of whom are picked up by the Guild. Cognitively, they span from extreme clarity to dementia.
The main room is a bright, pleasant space with a lot of sunlight. For many of the 30 to 50 people found here on any given day, this is the primary point of human contact in their lives.
The choir met and performed here for the last time on February 8 in a gospel concert presented for Black History Month. Moran showed up in a black evening gown.
"I want this to be special for them," Moran said. "I'll go home and cry later."
It was obvious that the GuildCare choir is a real gospel choir, but there were no matching robes. The women did take special care with what they wore, even though many of them are blind (like much of their audience).
There was also no slick choreography. When they marched in singing "This Is the Day That the Lord Has Made," the members were bumping into one another and shaking homemade pom-poms made of crepe paper and pipe cleaners.
The music was not perfect, but that only made it feel more authentic. Like the blues, these songs were rough and rich with the texture of lived experience.
Rachel Gonzalez, a Hispanic singer who lost some independent mobility with the recent death of her Seeing Eye dog, recited a five-minute poem she had written from memory. Dorothy Mathis, an African American woman who suffers from dementia, sang "Amazing Grace." It visibly appeared to shock the staff.
"Dorothy has days where she can't remember the difference between apple juice and orange juice," Moran said. "And there she is singing all four verses of 'Amazing Grace!'"
Daniela Luna belted out "Confidence in You" in Spanish.
An old man started to weep during "Reach Out and Touch (Somebody's Hand)," and Maria Claro held him. The music touches not just the singers, the audience, and the staff, but also the former staff.
After the performance, Gonzalez talked about her life, which started in Brooklyn and led her to Yonkers. She might have lost her one and only service animal, but not her sense of humor. She said she'd had a reporter "checked out" for his age and appearance.
"What? You think blind people don't care about what someone looks like?" she asked with mock surprise. "The blind men do it all the time! They'll be talking to a woman for the first time, and as soon as she goes away, they'll be asking their sighted friends: 'She pretty? What's her rack like?'
"Why can't blind women do this, too?" she asked playfully.
Lunch was served by the professional staff of the Guild and often included clock-based instructions: "You've got chicken at 12 o'clock, collard greens at three, spiced yams at six."
Before lunch was over, an announcement was made about upcoming activities. The following day, in the kind of room where choir practice or music therapy used to happen, a staff member announces without irony that there will be a lecture on "Medicaid and the federal deficit."
During cleanup, Debbie Moran, who is technically no longer working here, had changed out of her nice dress into casual clothes and was helping others with their plates.
"Can't we just get rid of plastic cups instead of getting rid of Debbie?" someone asked.
But it's the presence of Claro helping out with these tasks that's the strangest of all.
After all, she'd already been laid off a couple weeks earlier.
"They are mi gente, my people," Claro says later. "I was there because I told them I'd always be there for them. They asked me to come to their concert, so I came."
Claro had worked as an aide. She cleaned toilets and scrubbed floors and helped serve lunch. But she also translated for clients, helping them fill out forms and "giving people that personal touch—a hug or a kiss when someone needed it."
Claro worked at the Guild for more than a dozen years, first at the nursing home until it closed before moving to the day center. When she learned her full-time position was being eliminated, she was given a couple of choices, including a total layoff.
"They offered me a job downtown" in the administrative office, Claro says. But that involved "a typing test" she seemed nervous about and no contact with "mi gente," and it also meant, because of union seniority, "I would have bumped someone else off of their job, and I didn't feel right about that. I don't have kids. I don't have a mortgage. How could I make someone else lose their job who might have those things?"
Claro was also offered a part-time job at the day center, but one where she would not have been working with people. "I'd have just been cleaning," and she would have had to pay $800 a month for her insurance, meaning she'd earn "more on unemployment."
She took the layoff.
"I lost a job, but they lost a person who cared about them," Claro says. "And Dr. Morse doesn't have the faintest idea of the damage he did to those clients."
Despite this, Claro has nothing but kind words to say about Joan Clark, the manager of the center. "She's in a hard place," she says.
But Claro did call up the Guild's main office and demanded to speak to Morse, who promptly called her back.
"I think he was surprised that I had the balls to call him," Claro says. "Like I told him, I never had a problem speaking my mind. . . . Like the Puerto Ricans say: 'I've been kicked out of better places.' It didn't hurt me at all" to confront him.
Morse, she says, wanted to know why she hadn't taken the other jobs and told her they would let her know if any other positions opened up like the one she had been doing before. Claro still thinks he considers people like her "little cockroaches who can be fired."
Like many people who worked under him, Claro has glowing things to say about John Heimerdinger, the Guild CEO prior to Morse. He was the kind of person who knew your name when he got in the elevator with you, several people told the Voice. He sent a personally signed birthday card to every employee every year, Claro and others say.
Morse is viewed as much more distant and cool. Like many members of the 1 percent, he does not like press looking too closely at his life. He answered the Forward with a short e-mailed statement, did not speak to the Daily News, and, through the PR department at the Guild, did not respond to multiple interview requests from the Voice nor to detailed questions sent to him via e-mail.
However, quite unlike 1-percenters employed in the for-profit sector, there is a great deal that can be learned about nonprofit 1-percenters, as their employers have to file publicly viewable tax documents showing their pay.
Over the past few years, Morse's tenure at the Guild paints a picture of a CEO's pay corresponding in no way with its revenue stream.
In 2008, Morse's total compensation from the Guild was $843,502, breaking down as $199,775 in "reportable compensation from the organization," $513,706 in "reportable compensation from related organizations," and $130,021 in "estimated amount of other compensation from the organization and related organizations." The Guild's compensation committee reported on the "Schedule O" of its tax form that it had met and decided to freeze salaries for the CEO and executive and senior vice presidents for 2008 on December 10 of the previous year.
The year 2008 was a moderate one financially for the Guild: Investment revenue was down $1.3 million (after being up $10 million the year before), but the Guild still wound up with $3.8 million more in overall revenue after expenses.
But 2009—the first full year after the Wall Street debacle—was a terrible one for the Guild. It lost almost $4.4 million in investment revenue, contributions and program-service revenue were down, and it ended the year about $5 million in the red. Without attaching a date to when this would have happened (presumably in 2008) as they had in the previous year's tax documents, the compensation committee again froze top salaries for 2009.
Seems like a logical move, given how much revenue would have been projected to be down at the end of 2008 when the economy was in free fall. And yet Morse's overall compensation went up 82 percent in 2009 to a total of $1,533,558 (breaking down in the three categories from the Guild, related organizations, and the Guild plus related organizations in lumps of $614,610, $782,231, and $136,717, respectively).
On the same year's Schedule O, the committee reported that "subsequently the committee met on 10/19/09 to set compensation for 2010. At that time, the committee granted bonuses to the CEO, three executive vice presidents and senior vice president in lieu of a 2009 salary increase."
The case is never made for any bonus made midway through such a bleak economic year (one in which the CEO, whose role in nonprofits often involves fundraising, actually lost $27,372 in fundraising after expenses were paid).
But as strange as it is that the CEO's pay in 2009 seems to be at odds with the organization's revenue stream (a fact pointed out by the Daily News in September 2011, a possibly important date) something even stranger happened in 2010. That year was better economically for the Guild than 2009. Investments were up ($2.2 million from negative $4.4 million the year prior), total revenue was up about $10 million, and the organization ended the year more than $5 million in the black, rather than $5 million in the hole.
And in this better year, Morse's salary decreased 42.6 percent, coming "down" to $880,941 (breaking down in the three categories as $245,513, $509,911, and $125,517).
That amount of money kept Morse comfortably within the 1 percent. But 2009's spike of 82 percent, followed by a drop of 42.6 percent in 2010—both seemed to clash with the revenue stream the nonprofit was receiving. It's also presumably the kind of thing Governor Andrew Cuomo's new task force looking into pay at organizations that receive state money should be investigating.
Employees of the Guild say they were told by management that Morse's pay had been misrepresented by the Daily News and that the bump was merely a payment to his retirement fund. But it did little to assuage their ire—employee pensions had been frozen a few months earlier.
A close look at the Guild's 2010 tax returns, reported here in the Voice for the first time, reveals an interesting timeline. That year, the board's compensation committee wrote that the "committee arrives at annual salaries for the CEO, three executive vice presidents and senior vice president at a meeting at which the auditors and attorneys are present."
There is no date listed for the meeting, but the tax form is signed by Morse as president/CEO on December 4, 2011—two months after the Daily News article came out and embarrassed the organization. Did the board set his pay so "low" compared with the previous year after the article came out and because of it?
The Guild would not answer the Voice's question on this.
To be fair to Morse, There are many 1-percenters leading nonprofits and tax-exempt religious organizations.
In 2009, some congregants at the Riverside Church rebelled over the pay package of its new pastor, Brad R. Braxton, who had been selected by a search committee. The church offered Braxton a $250,000 salary and an overall annual compensation package reportedly worth $600,000, putting him in the 1 percent nationally, but only the 2 percent in New York. Unable to tame his flock over the flap, Braxton resigned after only nine months.
The Susan G. Komen for the Cure foundation drew more attention to its finances than it probably wanted to when it tried to stop funding projects with Planned Parenthood. According to the Los Angeles Times, Komen CEO Nancy Goodman Brinker was compensated $417,171 in 2010, putting her in the top 1 percent nationally and the top 2 percent in Dallas, where the organization is headquartered.
Brinker's pay is completely normal in the nonprofit world, as she heads an organization that raises hundreds of millions annually. Komen for the Cure rakes it in by slapping pink on everything from races to guns to buckets of KFC (as well as by suing anyone else who uses "cure" in their fundraiser). As the Los Angeles Times reported, "Among charities that take in between $200 million and $500 million each year, the average chief executive salary is $430,000, according to CharityWatch."
But what of a nonprofit where the work is with the destitute, and where the bulk of the money comes not from large-scale fundraising, but from government sources? Homes for the Homeless is a nonprofit in the same building as the Voice. In 2009, according to tax records, it received $19,531,261 of its $20,388,962 revenue (about 96 percent) from government grants. A fancy car can often be seen outside our building waiting for the CEO, Ralph Nunez, who, according to tax records for the organization the same year, had a total compensation package of $463,291—which has him in the 1 percent nationally and slumming it with the top 2 percent in the New York metro area.
When Barack Obama ran for the presidency, he encouraged Americans to follow his example as a young man and work as community organizers, presumably by doing work like Homes for the Homeless, whose mission is to "provide homeless families with the opportunities and support necessary to move out of shelter and live independently." But Obama probably didn't anticipate that such work itself would lead to people making more than he does by occupying the Oval Office ($400,000 a year, putting him in the 1 percent nationally and in the Washington, D.C., metro area).
Why do nonprofit boards pay their CEOs so much? As Professor Bruce Kogut of Columbia Business School explains it, one reason is that "the nonprofit sector wants to attract talented CEOs who also could be hired by for-profit firms. To attract talent, competitive salaries are offered.
"That said, nonprofit management is not the same as for-profit—the salary has less risk (it's not tied to profits or stock performance), and the nonprofit environment is overall less fraught with competition. And it cannot be expected that a nonprofit CEO will be paid equivalently to a for-profit CEO (who bears higher risk)."
Another justification for high salaries is that nonprofit CEOs need to run in circles with big donors to raise big bucks. But as Kogut explains: "This is a bad explanation for high salaries. The Metropolitan Museum of Art offers its head an apartment across the museum that surely facilitates dining with donors—but the apartment belongs to the museum. Similarly, a nonprofit can pay the club fees, etc. Paying a salary to support a life cycle is not efficient and not very transparent as the argument for a high salary."
(Another consequence of having to draw support from corporate fundraising is that it can bind nonprofits politically. Numerous nonprofits the Voice spoke with during Occupy Wall Street's height said privately they agreed with the mission, but could not appear in Zuccotti Park for fear of upsetting their banking donors.)
Kogut, asked via e-mail about Morse's pay in 2009, noted: "An 82 percent increase is surely unusual. To be fair, 2008 was a bad economic year where everyone lost revenue. While losing revenue due to an economic recession may not be reason for dismissal, it hardly constitutes reasons for a substantial pay raise.
Kogut added: "There should be transparent reasons for this pay. A president of a university can make $1 million; however, the budget can be several billions of dollars, especially due to hospitals that a university often runs. So $1.5 million by this benchmark seems high."
There's also the issue that the Guild gets a great deal of its money from tax dollars. Might it make sense to compare pay of CEOs of government-bankrolled nonprofits to government salaries? Like Homes for the Homeless, the Guild is largely in the business of processing government funds to provide social services. It is, in essence, a government contractor. And the point of contractors, we're always hearing (even though it's often shown to be untrue), is that they'll lower costs by introducing competition.
So how are they successfully lowering costs for taxpayers when their CEOs are earning more than "government CEOs" like Mayor Bloomberg ($225,000, though Bloomberg only accepts $1 of that), Governor Cuomo ($170,000), and the president of the United States?
At least the Guild knows where to cut costs—like Debbie Moran's $167 every couple of weeks, which is really a bargain, since she is willing to keep working.
Moran has been asked to conduct a spring concert without any rehearsal, so the Guild can pay her for only one visit.
"I know they'll be prepared," Moran says of her singers, but she knows they'll be missing the formally therapeutic aspect of her work, and there's only so much preparation blind elderly people—some with dementia—can do.
"I work with a lot of choirs," notes Moran, who also teaches piano and plays in church to make ends meet. "But this one was special. Because when these people sang, you could really see how it brought them out of the dark.
"We have to find a way to keep this going," Moran says, praising her singers who wrote letters and asked anyone who would listen to contact their elected officials on behalf of increasing Medicaid funding.
Despite being let go, just like Claro, Moran has nothing but good things to say about her former supervisor, Joan Clark, and understands the pressure she's under. Moran knows she's just one part of a multimillion-dollar operation. She doesn't have anything bad to say about Morse, either.
Moran just wants to play her music with her people and seems optimistic that when Morse learns what's being lost, he'll set things right.
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