Second Place Writing – In-Depth


He’s the highest-paid charity executive around

Among nonprofits, the CEO of Goodwill Industries-Suncoast Inc. makes more than most: $530,693 in 2003.
Originally published in the St. Petersburg Times

Things were looking up for Goodwill Industries-Suncoast Inc. Revenue was on the rise after some lean times in the aftermath of 9/11. A new plan for the nonprofit’s trademark secondhand stores was set to provide more services than ever.

The corporate board attributed such success to its visionary leader, R. Lee Waits.

When it came time to set Waits’ annual compensation that day in the late summer of 2003, the board deliberated for less than an hour.

Then it awarded Waits a salary of $304,974. And there was more: Under a contract Waits negotiated in 1992, the board paid another $200,000 into his retirement fund.

Along with other benefits, his total 2003 compensation was $530,693.

“We’re feeling very pleased with the way Goodwill Industries-Suncoast has performed over Lee’s tenure,” said Rick Ludwig, vice chairman of the board. “It is a very, very challenging and difficult enterprise.”

Waits, 65, is the highest paid executive of a social services nonprofit agency in the Tampa Bay area, according to a St. Petersburg Times analysis. But six-figure salaries for charity leaders are becoming increasingly common.

The average annual compensation of the top executive at the area’s 10 biggest nonprofits, as measured by revenue, was $257,393 in 2003, the Times has found.

That includes the $408,730 paid to the head of Florida Blood Services Inc., Donald D. Doddridge, and the $110,583 in total compensation that Coordinated Child Care of Pinellas Inc. paid its executive director, Guy Cooley.

The gap between executive salaries at big nonprofits and for-profit businesses is shrinking, stirring national debate. Some contend that nonprofit organizations like the St. Petersburg-based Goodwill, which has an annual budget of close to $40-million, compete with the business world for talented professionals and need to pay them accordingly.

Others insist that every dollar spent on executive compensation is a dollar less for those in need.

“A half-million dollars for a budget of that size is a lot of money,” said Peter Manzo, executive director of the Center for Nonprofit Management in California. “There are people running hospitals that probably make less than that.”

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Simply looking at Waits’ 2003 compensation distorts the picture, Goodwill officials say.

Waits took a pay cut in 2002, after the economy tanked and the nonprofit’s revenues sank. By 2003, said vice president of finance Gary Hebert, “We had to play catchup.”

Board members said they based Waits’ 2003 salary on his tenure, the size and complexity of the organization and a salary review that compared CEO salaries from 840 entities – nearly 80 percent of them public, for-profit companies.

The salary they chose for Waits, $304,974, is “not what I consider to be in the extreme,” Ludwig said, and more than $7,000 below the survey average.

Board members stress that the retirement payment of about $200,000 made that year was a one-time act to restore Waits’ retirement fund after the post-9/11 slowdown.

This year, Waits’ base salary is $262,500, his bonus is $75,000 and deferred compensation is $26,250, for a total of $363,750.

By comparison, in 2003 the salary of the leader of the Tampa Bay area’s biggest nonprofit, the Hospice of the Florida Suncoast, was $249,000 – $55,000 lower than Waits’ pay, not counting the one-time payment.

The hospice’s revenue was $90-million that year, more than twice what Goodwill generated.

“I think we have always been clear that we are the steward of the public’s money,” Mary Labyak, the hospice’s executive director, said. “We have to use it wisely.”

Waits’ salary also outpaced those of his counterparts in the area’s for-profit businesses of similar size.

Of all Tampa Bay area companies with revenues within $10-million of Goodwill’s, only one executive was paid more than $250,000 in 2003, the latest year for which data were available. The base salary of Walter M. Groteke, chairman and CEO of NetWolves Corp., which generated $25-million in revenue that year, was $275,000.

Goodwill’s top jobs are just as complicated as similar posts at for-profit companies, said George Kessinger, president and CEO of Goodwill Industries International, in Maryland.

“It takes someone with talent to manage something like that,” he said.

But no matter how the board explains Waits’ salary, it will be difficult to justify to the public, said Joel Orosz, distinguished professor of philanthropic studies at Grand Valley State University in Michigan.

“The complicated truth is hard to explain,” he said.

* * *

More than a decade ago, the $463,000 annual compensation of the president of the United Way of America sparked unprecedented scrutiny of charities throughout the nation.

But as corporate scandals involving Enron and WorldCom grabbed headlines, salaries at nonprofits faded from the spotlight.

Now, once again, nonprofit organizations are attracting scrutiny.

Just last year, the IRS launched an investigation into tax exempt organizations to put an end to excessive compensation and benefits. The IRS contacted about 2,000 charities and foundations across the nation but “can’t confirm or deny that anything has happened with regard to this organization,” said Gloria Sutton, IRS media relations specialist.

The U.S. Senate Finance Committee is reviewing a series of more than 120 proposed recommendations that would increase penalties and create more transparency in the nonprofit world.

Regulations already in place often go without enforcement, and the Internal Revenue Service doesn’t have enough resources to prosecute allegations, said Diana Aviv, president and CEO of Independent Sector, a watchdog organization that suggests policies for nonprofits.

Some in the nonprofit world itself question high executive salaries.

Cooley, 57, has served as executive director of Coordinated Child Care of Pinellas Inc. for about 24 years. The organization had a $42-million budget in 2003, when his salary was $97,968 and benefits amounted to $12,615.

His agency’s surveys suggest his salary should be $130,000 or $140,000, and his board pushed him to accept a larger paycheck. But he didn’t want it.

“It just seemed like when you are working with economically disadvantaged folks, you want to get as much money out to the clients,” he said.

That’s what George Firrincieli assumed.

Firrincieli, 43, often shops at the Goodwill store on Gandy Boulevard in St. Petersburg. Looking at vases on a recent evening, he said he would have never guessed that the executive of the regional Goodwill was being paid more than $300,000 a year.

“You just expect nonprofit executives to make less,” he said. “When you look at all the people working here, obviously they are not driving Mercedes and Lexuses.”

* * *

Waits, in fact, drives a 2000 Audi A6, the company car. His wife, Gail, drives their gray 2004 Porsche 911 Carrera.

They traded up for the Porsche, and it is the only car the couple own, he said.

“I am a very private person,” Waits said. “It is not that I am this flashy, extravagant CEO.”

He said he is very uncomfortable talking about his personal life.

Waits grew up in Jacksonville and attended Jacksonville University for three years, leaving without a degree to serve in the Coast Guard. After returning, he married and worked in retail with his father.

By 1976, he moved to the Tampa Bay region and enrolled in a course about the medical aspects of disabilities at the University of South Florida.

It was then that Waits decided he wanted to go into what he calls the “helping profession.”

He took a job as residence coordinator at the local Goodwill, earning a salary of about $15,000. Waits quickly rose through the ranks, taking the executive seat in 1989. At the time, operating revenue was under $8-million.

By 2001, Waits had restructured the business model of the agency’s stores to better compete with discount retailers like Wal-Mart. He cleaned up run-down locations and started replacing them with superstore models.

By 2003, the organization had 1,200 employees who served 63,000 people and spent about $34-million on programs in 10 counties, including 18 store locations. Management and general costs amounted to about $4.5-million, according to the Goodwill-Suncoast’s financial report.

The organization recently ranked first in the number of people served, first in the number of job placements and eighth in total operating revenue among the nation’s 173 Goodwill organizations.

Waits said he is the kind of executive who gets into the office at 7 a.m. and stays until at least 7 p.m. When he goes on vacation, he takes his BlackBerry.

“Lee is one of the people that groups will look toward for thoughtful leadership,” said Dave Barringer, vice president of marketing and communication for Goodwill Industries International. “He doesn’t just get into a project to make money. He looks at how it will get back to the people in need. If it doesn’t help them, he doesn’t touch it.”

Waits said he would take the job for less money. But his board says he deserves his salary.

“To cut to the bottom line, we are very satisfied, elated with what Lee has done,” said Martin Gladyz, chairman of the Goodwill-Suncoast board.

Waits will be 66 in September and intends to leave by the time he’s 70.

But even when retired, Waits will draw a six-figure income.

Under terms of a 1992 agreement, Goodwill will pay Waits as much as 70 percent of the average salary he earned in his final three years of employement.

If he waits until he’s 70, the agency estimates he’ll be paid $257,363 a year for life.

–Times researcher Caryn Baird contributed to this report.