Massachusetts Attorney General Releases Charity CEO Compensation Report
The report reflects a particular interest in retirement compensation. The Division expresses the view that deferred compensation arrangements that require a charity to provide a certain level of income replacement in retirement, even if such arrangements appear reasonable in light of comparability data, can place a charity at considerable risk. Such an arrangement is commonly referred to as “supplemental executive retirement plan,” or “SERP.”
The report also comments on factors a board should consider in determining whether a compensation arrangement is reasonable. The report suggests that boards can lose perspective when their compensation decisions are based only on reviewing data for comparable positions at other organizations. In evaluating whether compensation is reasonable, the report urges boards to consider other factors, including the size of a CEO’s compensation arrangement compared to that of the charity’s own workforce.
In addition, the report expresses the view that compensation should be reported in a more detailed manner and, for certain organizations, sooner than is currently required by the IRS Form 990. The Division announced that, early in 2014, a new Schedule EC that will require detailed information about CEO compensation would be made a part of the annual Form PC that Massachusetts charities file. A copy of the proposed Schedule EC, which the charities that participated in the review were asked to complete, is attached to the report.
For more information about the report, please contact your usual Ropes & Gray attorney or: