September 28, 2004,
The IRS has announced that it will investigate the executive-compensation packages paid at 2,000 nonprofit organizations and charities. It could do worse than turning its spotlight on the nation's foremost environmental charities. According to a recent report from Public Interest Watch, some of these organizations pay their top executives handsome salaries that bear comparison to packages in the private sector, where considerably more risk is assumed. Yet not all green charities are the same. The top charities could learn from others in their movement.
The Public Interest Watch report, "Executives at Environmental Charities Go (For The) Green," carefully analyzes the earnings of top executives at four major environmental organizations the Natural Resources Defense Council (NRDC), Environmental Defense, Inc., Greenpeace Fund, Inc., and the Sierra Club Foundation. The data are culled from the most recent IRS Forms 990 available (2001 or 2002), and are a matter of public record (see for online versions).
According to the report, NRDC employs nine people who each earn over $150,000 each year, including President John Adams, who was paid a whopping $368,342 in 2001. These salaries include deferred contributions to employee-retirement funds, but even without these, eight of the nine still grossed salaries of over $140,000. Together, these nine employees were paid a grand total of $1,753,849 in 2001.
Yet even this figure is dwarfed by the huge amount paid to its principal employees by Environmental Defense, Inc., whose top 13 employees received $2,120,980 in the same year. President Fred Krupp was compensated to the tune of $327,414, while Senior Vice President Diana Josephson and Vice President Marcia Aronoff each grossed over $200,000.
To put this into perspective, consider that Environmental Defense received just over $25,000,000 in individual memberships and contributions in 2002, according to its own annual report. So 8.5 cents of every dollar donated goes to the bank accounts of just these 13 people. Think about it like this: Las Vegas casinos will bank a "house take" of 9 percent from some rolls on a craps table.
Both NRDC and Environmental Defense are charitable organizations with certain restrictions, organized under section 501(c)3 of the internal-revenue code. Public Interest Watch also looked at the finances of the Sierra Club Foundation, the Sierra Club's 501(c)3 affiliate. Its top five employees earned only $411,670 between them in 2002, with the executive director, John DeCock, earning just under $140,000. As Public Interest Watch says, these compensation packages do not appear to be unreasonable.
Nor is the Sierra Club Foundation unusual. According to its Form 990, People for the Ethical Treatment of Animals, an organization whose aims and tactics many Americans find objectionable, is at least reasonable in its payment structure. The top five executives there earned only $294,234 in 2001 with the president, Ingrid Newkirk, seemingly leading by example with a gross salary of just over $30,000.
Public Interest Watch also investigated the payments made by Greenpeace Fund, Inc., whose exact status it has questioned in previous reports. This organization, a 501(c)3, exists solely to pass funds along to other Greenpeace organizations, as Public Interest Watch found when it investigated its affairs for 2000. The watchdog concluded that Greenpeace Fund, Inc. was "a shell corporation established for the purpose of enabling tax-deductible contributions from big donors and from foundations to flow illegally to Greenpeace, Inc. and Greenpeace International." This "shell corporation" paid nine employees $418,022 in 2001, more than the Sierra Club Foundation did to its top officers. Moreover, as Public Interest Watch points out, some of these employees "received additional compensation from Greenpeace itself (Greenpeace, Inc.)."
The whole compensation issue belies the aggressive "grassroots" marketing campaigns that these groups use to drag in the greenbacks. Greenpeace volunteers harass people on street corners with the words, "Have you got a minute for Greenpeace?" which eventually morphs into requests for money. Environmental Defense offers supporters t-shirts if they pass on the e-mail addresses of other likely donors.
As Public Interest Watch Executive Director Lewis Fein commented, "These groups literally beg for donations, giving the impression that they cannot accomplish their mission unless the average citizen pitches in. At the same time they are quietly paying their executives huge six-figure salaries."
As the figures above make clear, not all environmentalist organizations play this game. Those who do, however, deserve much closer scrutiny. The IRS would be right to investigate. Of course, such high salaries can buy high-priced lawyers.
Iain Murray is a senior fellow at the Competitive Enterprise Institute, where he specializes in the debate over climate change and the use and abuse of science in the political process.