I appreciate the time many of you have taken to enter into the discussion about AOPA’s operations and our objections to AVweb’s inaccurate reporting about our finances.
Several of you who commented raised questions about AOPA’s finances, and it’s an issue that really deserves some discussion. To be meaningful, that discussion must be about more than just the numbers, although I will share numbers with you.
Until now, I thought most people who were interested in AOPA’s finances had no trouble finding the information they sought. AOPA has long provided a good bit of that information on our Web site, in our magazines, and in other forums as appropriate. If you have not seen it, you can view this information here.
However, as I said in my most recent post, a good case has been made for having a “governance section” on our Web site where such information can be easily accessed. We will set that up.
AOPA also reports compensation on the IRS Form 990s that have received a good bit of attention. While the numbers are accurate in and of themselves, they just aren’t a good basis for comparison. That’s because the IRS reporting requirements change from year to year. Personnel changes also have an effect as do some types of benefits. For example, if you are in a job that allows you to earn compensation in one year and defer receiving that money until some future time, you must report those earnings twice–once when they are actually earned and again when they are received. In effect, you are double counting the same money. So, when you compare forms from different years, you may actually be comparing significantly different numbers of people in different types of jobs with different degrees of responsibility. You may even be reporting numbers that were already reported some years ago. But, hey, it’s a federal form.
For a number of years, Washington-based publications have tracked association compensation and developed skills and programs that help them decipher these reports. One such group is called the CEO Update. A recent article presents a pretty clear picture of what has been happening to association compensation. It is worth reviewing to get an understanding of the environment in which associations operate.
By any measure, those of us running associations are well paid. And, the compensation levels have been rising at a pretty good rate. Those increases have spread beyond the president’s office to key leaders within associations because it’s challenging to recruit really good talent with the skills and experience to lead an organization as large as AOPA. In fact, you should know that AOPA is one of the largest associations in the country. With our membership and our roughly $60 million a year budget, we enjoy a capacity that not many organizations can match. And we put it to work every day at all levels of government, in our highly respected publications, in providing information and services to our members, and in dozens of other ways.
However, our real strength is our people. Having experienced, respected, and talented people running our publications and advocacy programs is essential if we are going to compete in this biggest of big-league arenas called Washington, D.C. And, the many fine people who support the organization through marketing, communication, finance and other areas are also essential. If we are to fulfill the mission to protect and preserve the freedom to fly, we must employ the best people we can find to engage in the important and challenging work we do. In fact, as members, you should insist upon it.
As I explained at an all-staff meeting early in my tenure, perhaps my most important responsibility is a lot like coaching a professional team, meaning I must ensure we have the very best people we can find playing in the right positions in the organization. For this reason, I do spend a good deal of time on getting the people and the structure of the organization right for the times.
Given the challenges to our economy and the large policy challenges we faced in Washington when I entered AOPA, there was little margin for error. An important part of my job was to mold a very strong organization into something that was right for the changing times.
When I arrived, AOPA had an effective structure in place that consisted of six executive vice presidents who reported to the president. It worked. And that’s what mattered.
Over time, I felt that I could be most effective if I was spending time out with AOPA members, as well as federal, state, and local officials. To make that work, some changes seemed to make sense. Our structure now has two executive vice presidents reporting to me. One is our chief operating officer and one is our chief financial officer. In addition, the senior vice president of human resources reports to me as does the president of the AOPA Foundation as I am the chief executive officer of our Foundation. This structure did not happen overnight. It has evolved over the past two years. I share this because I think it’s important to understand how AOPA has evolved to meet the times and why making year- to-year compensation comparisons is so challenging. (But we will get back to this). Today, as always, each member of the leadership team is identified every month in the masthead near the front of Pilot magazine.
To retain and recruit talented people we need competitive compensation policies. To make sure we stay competetive, AOPA’s Board of Trustees monitors compensation closely with the help of an outside, independent compensation consultant. Together, they compare policies and compensation levels from a broad range of associations. It’s worth noting, by the way, that our board members receive no payment for the hard work they do.
While I acknowledge we must be competetive, I will also tell you that many associations have senior executives who are paid two or three times what I and some of our key people are paid. And some of these same associations are ones we run into, and sometimes compete with, as we advocate on behalf of general aviation. The key is to be competitive–competitive in salaries so we can attract the right talent to compete for attention and support in Washington. And I firmly believe we are.
Another way to look at it is to imagine your $45 annual dues allowed you into a stadium to watch your big league baseball team. You would want your team to hit, catch, pitch, score runs and, in other words, win games! If your team had mediocre players, the chance of winning would be far less and you would demand changes so the team would be more competitive.
In managing the resources we are entrusted with, we look for a balance. We cannot, frankly, offer the highest levels of compensation, but we can be competitive and that is what we strive to do.
Reporting the Numbers
So, let me talk in more detail about what we share publicly about AOPA compensation.
We have more than 200 people who come to work at AOPA around the country every day. Like most people, they come with the expectation that what they earn is a private matter. Also, from a business standpoint, our association does not benefit by sharing what we pay our very good people–honestly, I do not want them recruited away.
As I mentioned earlier, associations are required to report compensation for certain people on the IRS Form 990. Here’s a copy of one if you are interested. The requirements for who should be included on this form change regularly and we fully comply with those requirements. Right now, we are required to report the compensation and title of anyone making more than $150,000 a year.
A few people and news organizations ask for these documents each year and we provide them. Organizations like CEO Update report in detail on associations and provide listings of what associations pay their top people. So from my perspective, this information has been out in the open for years.
What has complicated the interpretation of our reports from 2008 through 2010 are the changes I described. I transitioned into AOPA in 2008. Some transitioned out in 2009. Some were promoted with added responsibilities and that meant a commensurate salary increase. IRS reporting requirements also changed.
When Belvoir Media’s chief operating officer tried to use these forms to calculate how compensation had changed since my arrival in 2009, he was destined to fail. Without talking to us, the numbers cannot be sorted out because both AOPA’s organizational structure and the federal reporting requirements changed from one year to the next.
So, in response to further questions and in an effort to put to rest the false notion that AOPA executives had received pay raises of 14%, I took the position that we would fulfill a request for information about the 10 top-paid people at AOPA. I felt the best way to provide meaningful information was to look at those positions by base salary at year end 2008, 2009 and 2010. To be sure there are health benefits and other incentives, but the base salary provides the clearest and most direct number to compare year to year.
Still, I was determined for privacy and business reasons not to report on individuals not considered “reportable” to the IRS in that period. So, instead of providing information for those people on an individual basis, I provided a lump sum of their salaries. People who are “reportable” to the IRS are identified by title. Using that information, we created the chart below. It totals the combined base salaries for the 10 top-paid people in each year, both reportable and non-reportable. Noted below the total is the percentage increase from one year to the next.
This is what we provided to Belvoir Media Group’s COO a couple of weeks ago for his ongoing analysis.
Here are the numbers.
|Chief Operating Officer
|EVP, Government Affairs
|EVP, Chief Financial Officer
|President, AOPA Foundation
|Chief Development Officer
|Senior VP Government Affairs
|Senior VP, Human Resources
|VP, Legislative Affairs
|VP, Chief Information Officer
|VP, Operations & International
|Ten Highest Paid Total
In addition to this information, I am committed to continuing to provide data to help you, our members, understand what is happening at AOPA. As we file Form 990 reports in the future and place them in the Governance section we are developing for our AOPA Web site, I will give you an update and an accounting to explain just where we are with regard to our financial situation.
Given all this information, you can see — I hope — why I really do expect AVweb to correct the pay raise story that they knew was wrong 32 days ago….