The Securities and Exchange Commission recently finalized a rule forcing businesses to share data with workers that expose how much more their chief executives make than they do.
It’s easy to mistake big non-profits such as these as for-profit companies, because they operate in similar fashion. They pay their top people a lot of money, charge fees for their services, make investments, market and lobby legislators. So how well do their executives do financially? Pretty darn well, it turns out. And many of their subordinates do just fine, too.
According to the latest publicly available 990 tax forms filed to the IRS by the three organizations, which operate under 501(c)3 tax exempt status because of their declared educational missions:
- Kurt Landgraf, now the former president and chief executive officer of the Educational Testing Service, earned for the 2013 fiscal year ending Dec. 31, 2013: $1,307,314 in reportable compensation and $42,210 in estimated other compensation from the organization and related organizations. [See the ETS 990 here.]
- Jon Whitmore, the chief executive officer of ACT, earned for the 2013 fiscal year ending Aug. 31, 2014: $672,853 in salary, plus a bonus of $150,000, and other reportable compensation of $12,949, plus retirement contributions of $57,152, plus other nontaxable benefits of $18,109. That’s a total of $911,073. [See the ACT 990 here.]
- David Coleman, the president and chief executive officer of the College Board, as well as a trustee, earned for the 2013 fiscal year ending June 30, 2014: $690,854 in reportable compensation plus $43,338 in other compensation from the organization and related organizations. Total: $734,192. (Coleman, a co-author of the Common Core State Standards in English Language Arts, joined the College Board in 2012, and was new in his job). [See the College Board 990 here.]
High compensations at big non-profit organizations are permitted by the U.S. tax code. Major hospitals and research institutions are tax-exempt non-profits, as, in fact, was the National Football League for decades. (The NFL announced earlier this year it was ending its tax-exempt status, which, according to this Washington Post story, means that it will have to pay taxes on its income but “will no longer have to file yearly tax forms that publicly disclose details like executive pay, including for Commissioner Roger Goodell, who made $44 million in 2012.”)
A spokesman for the Internal Revenue Service said agency officials would not discuss the issue of tax-exempt status for the College Board, the ACT and ETS. But Marcus Owen, an attorney who was the director of the Exempt Organizations Division of the Internal Revenue Service for 10 years, said that non-profit organizations can pay their chief executives what “comparable institutions would pay for similar services under similar circumstances.” He said, “You can’t say $100,000 is too much or too little or just right without knowing more,” adding that non-profits that exceed market rates for compensation purposes are required to pay an excise tax.
In 2007, the Iowa attorney general’s office wanted the IRS to review the salaries of the Iowa City-based ACT after The Des Moines Register disclosed that ACT was paying board members more than 98 percent of nonprofit corporations nationally and that some ACT board members received more than $40,000 annually to attend four meetings. The ACT remained nonprofit.
Spokesmen for the College Board, the ETS and ACTs said that executive compensation experts help them set salaries for their leaders. Tom Ewing, director of external affairs at the Educational Testing Service, said:
ETS’s executive compensation, including for our president, is informed by guidance from expert independent compensation consultants and relevant market data for similar executive positions in organizations of comparable size and complexity to ETS. It is also based on the principle that we have to attract people who can best help us fulfill our mission to advance learning and opportunity.
Zach Goldberg, director of media relations for the College Board, said in an e-mail:
College Board salaries are within the standard range for similar organizations. Executive salaries – including our president’s salary – are set by our Board of Trustees in consultation with independent, external compensation experts. These outside experts benchmark salaries against comparable organizations, including educational organizations and other not-for-profit institutions. College Board executive salaries are very much in line with the capabilities of professionals required to run an organization of this size and complexity.The College Board is a non-profit, membership organization comprised of more than 6,000 colleges, schools and districts. All revenue is reinvested into programs aimed at expanding educational opportunities for all students, including exam fee reductions for low-income students. The College Board contributes more than $75 million in fee waivers to students each year.
Ed Colby, director of public relations for ACT, said in an e-mail:
Compensation of the CEO is determined by ACT’s Board of Directors based upon a process that includes periodic compensation studies conducted by an independent consultant. Factors considered in the review process include organizational size, geographic location, the nature of services provided, the level of experience and specific responsibilities of the position considered and the components of the compensation offered. Based on this review, the Board believes that ACT’s compensation is reasonable.
Bob Schaeffer, public education director of the National Center for Fair and Open Test, FairTest, a national nonprofit organization that works to curb the abuse and misuse of standardized tests, said in an e-mail that the operations of these non-profits are “similar to taxable corporations,” such as NCS Pearson, and he called for their tax-exempt status to be reevaluated by the IRS and state authorities.
He also called for fees associated with college admissions testing to be substantially reduced to reflect actual costs, and said that there should be more public oversight and regulation of the activities of the testing companies because of the role standardized tests play in higher education. He wrote in an e-mail:
It’s time to examine the examiners by holding the standardized testing industry accountable for failing to operate cost-effectively. Both the IRS and Congress should look into the fat salaries paid to executives at the tax-exempt testing companies. Federal and state officials should also investigate these “not for profit” organizations for overcharging students and parents to pad their bottom lines. The behavior of the College Board and Educational Testing Service is particularly outrageous: they have millions in cash-on-hand but refuse to compensate students for the disruption in their lives caused by the June 6 SAT timing/scoring error.
(Schaeffer is referring to the botched June 6 administration of the SAT in the United States, which forced the College Board to discard two of 10 sections of the SAT — or 22 percent of the test — because of printing errors on test booklets.)
FairTest, for what it’s worth, operates on a different scale than do the three big testing nonprofits. Its 990 tax form for the 2013 fiscal year ending Sept. 30, 2014, shows a total revenue of $145,332 — and not a single employee earned $100,000 or more.
The biggest organization of the three big testing non-profits in terms of revenues is the ETS, with $1.14 billion in revenues and $1.11 billion in expenses, according to the 2013 tax form. It’s total assets were $941,669,696, less than the College Board’s, which were more than $1 billion. The ETS gets about half of its revenues from higher education testing, with K-12 testing about 30 percent of its revenues. The College Board paid the ETS $322 million for “testing services” in the 2013 fiscal year.
ETS paid some members of its Board of Directors at a rate up to $103,000 a year for what is reported as approximately two hours of work a week, about $1,000 an hour. And more than three dozen top executives received more than $300,000 in total annual compensation; seven of those topped half a million dollars. For example, Philip Tabbiner, senior vice president for business innovation and growth, earned $655,055 in reportable compensation. Randy Bennett, Frederiksen Chair for assessment innovation, earned $316,450 in reportable compensation and a total of $489,758. Donado Yvette, vice president and treasurer, earned $422,793 in reportable compensation.
At the College Board, senior vice president Peter Negroni earned a total of $811,873 — the majority part of a severance package. That total was more than what was listed for Coleman, the College Board president.
The College Board itself claimed total assets that topped $1 billion, and its “assessment” programs — mostly the SAT and PSAT — took in $333 million but spent $289 million, for a net of $44 million. ACT’s total assets were $530,638,419 for fiscal 2013.
The College Board spent $1,768,295 on lobbying Congress and other public officials, the form says. ACT’s 990 form reported $674,485 in lobbying expenses, and the ETS, $40,851.
Here are some salaries from the ACT 990:
Here are salaries from the College Board 990: