A Discussion About Compensation

December 12, 2010 by Craig Fuller

 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.

JOB TITLE Salary 2008 Salary 2009 Salary 2010
President 517,826 500,000 515,000
Chief Operating Officer 299,400 na 270,000
EVP, Government Affairs 215,498 229,505 na
EVP, Chief Financial Officer 218,325 270,000 278,100
President, AOPA Foundation 246,452 257,542 265,268
Chief Development Officer 190,000 205,200 211,356
Senior VP Government Affairs na 205,000 211,150
Senior VP, Human Resources 170,000 182,750 200,000
VP, Legislative Affairs na 200,000 204,000
VP, Chief Information Officer na 185,000 191,475
VP, Operations & International 150,000 na na
Non-reportable Total 429,490 260,000 185,000
Ten Highest Paid Total $ 2,436,991 $ 2,494,997 $ 2,531,349
Annual Increase 2.4% 1.5%

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….

20 Responses to “A Discussion About Compensation”

  1. Peter DC Says:

    Hurray for getting this over with. At least as far as I am concerned. As long as you keep fighting the way you have, I won’t even comment on the compensation itself. Now, let’s all focus on the outside world, plenty of more pertinent wars of words to fight there. Merry Christmas.

  2. Jim DeLaHunt Says:

    Thank you, it’s helpful for you to address this. Good for you, and good for AvWeb for bringing the subject up.

    For what it’s worth, the page you link to does link to PDF files with financial information, but it could be a bit clearer about it. The page is an article titled, “State of the Association: MISSION: engagement” [May 2010 Volume 53 / Number 5]. The article is all narrative about the AOPA’s accomplishments for the year; no real discussion of financial information.

    There’s a side box “State of the Association” with six links. At first read, I interpreted this box as a table of contents, and I ignored it because I was going to read the whole article. In fact, those links point to PDF files with interesting financial information.

    It would perhaps have been clearer for the side box to be titled “Association Financial Reports”, or something like that, instead of echoing the article title with “State of the Association”. It would have been clearer to have some text in the box saying, “Here are links to our financial reports”. And I personally would have preferred to have the six financial reports wrapped up into a single PDF file, though I can imagine others might prefer otherwise.

    Does the print magazine contain financial reports? I don’t recall seeing table of numbers on those pages, though it’s quite possible I missed it.

    As an AOPA member, all in all I’m pleased by this exchange. AvWeb is getting relevant and interesting information out into the open, and my support for AOPA is now buttressed by more facts. Good for both of you.

  3. Tom Says:

    To my mind, a half-million dollar salary to the President of AOPA is excessive. I also find his comment that the salary data does not include “other incentives” lacking in candor. Although I cannot tell from the data presented, I would not be surprised to find that those “other incentives” are also quite substantial. I guess I will look to AvWeb for an answer to that question.

    Clearly, instead of paying the President millions of dollars to run AOPA, I would prefer that we find a President whose passion for the Association allows that person to take a more reasonable salary. I think there are many highly competent and motivated people who would do a superb job for less than 50% of what Craig Fuller is requiring. Rather than making one individual a multi-millionaire, we could put the money-saved into the lobbying efforts, the Air Safety Foundation, or the effort to increase the pilot population. That seems like a better use of AOPA’s resources and more inline with what the members desire.

    Tom

  4. Brian Preston Says:

    I am quitting AOPA!

  5. George Horn Says:

    The President of the United States makes $400K. .
    The president of AOPA makes $515K.
    Which is more influential with regard to aviation fees and taxes?
    I think a system of bonuses and incentives are more likely to produce results from the leader of an aviation lobby such as AOPA.
    The only way to accomplish this is to encourage individual AOPA members to QUIT SIGNING PROXY’S and VOTE INDIVIDUALLY
    for AOPA board members and officers, and the only way for that to be accomplished is to allow AOPA MEMBERS to vote by MAIL.

  6. Todd Lloyd Says:

    As a small business owner with about the same number of employees as AOPA, I’m concerned about the amount of money being spent on the management of the association. It seems excessive to me. I also think that during this economic time our association would be setting a great example for the industry by reducing these salaries.

    While I agree good people command a premium, it appears our association has not even tried to see if the same results could be obtained at a lower cost.

    In short, it is my hope our board members are questioning this data and making changes that are more in alignment with the industry as a whole and with other associations.

    I do appreciate AvWeb for bringing this to our attention and I respect Mr. Fuller for responding quickly.

  7. Concerned AOPA Member Says:

    I appreciated AOPA’s honesty with the actual salary reports. Good people command a premium however, this confirms the fact that AOPA as a non-profit advocacy groups executive compensation is excessive. Not to mention Mr. Fuller comments regard these reports not including “other incentives”. A 60 million dollar a year budget does not mean executives automatically get to take 2% of the total budget for their compensation. Your members are not multi millionaires and that does not give AOPA the right to spread its members hard earned money to make millionaires out of its officers. I appreciate Avweb bringing this to our attention as now it is in your hands for fixing. Simply replying to emails and blogs saying that you didn’t get a raise last year does not justify your past excessive salaries and compensation packages. Only a signifigant change in your executive compensation structure will show your true commitment to the aviation community and keeping AOPA true to its roots.

    Myself and many others have been a members for some time and unfortunately unless the compensation packages change I will not be renewing my membership this year as well as not voting with proxies.

    Thank you for your past service.

    -A concerned AOPA member

  8. David Dorman Says:

    I am deeply saddened by the direction AOPA has taken in the last couple of years and this latest issue has convinced me that former lobbyist and now AOPA President Craig Fuller has the same condescending attitude towards his constituents (AOPA members) as does Congress (taxpayers).

    So I am voting with my wallet and have informed AOPA to cancel my membership.

  9. Wally Loney Says:

    I am pleased that Mr. Fuller has made these figures public. I realize that running a large organization requires exceptional skills and therefore more compensation than we mere mortals. I personally have never made a six figure annual salary. I am only a paramedic, so maybe I don’t really do anything all that important.
    Ooops! Maybe I’m just wondering about comparative values. I recognize the need to protect our right to fly, and all that entails. And I appreciate the services available from AOPA that ARE still free. But isn’t a half-million dollars a year a bit excessive. Here is how I view a half-million dollars: If I had that much wealth added to my retirement savings right now, I could live on the interest for the rest of my life and not reduce my standard of living one iota, nor would I have to touch the principal. Are you really aware that you make THAT much more than the common folk?
    I do appreciate AvWeb for bringing this to our attention and I respect Mr. Fuller for responding quickly.

  10. David Zirbel Says:

    I, too, am just a lowly private pilot who works in a manufacturing industry not related to the aviation industry. I am not in the 6 figure income range either, but I am aware of the salaries of various manufacturing companies’ executives and officials, and the salaries of the AOPA executives are somewhat paltry in comparison. Does this mean that I l agree with the salaries all of these folks are making? Absolutely not! But I can be realistic about it, and I know that one typically gets what one pays for. That being said, I agree that AOPA salaries are competitive and in line with other associations. Cancel my AOPA membership? No way! Stop reading AvWeb? Again, no way! Filter all information from all sources before making any decisions? One would be crazy if he didn’t.

  11. Tom Haines Says:

    Mr. DeLaHunt, Good suggestion. The blue box on the page now carries the title: “Association Financial Reports.” http://www.aopa.org/members/files/pilot/2010/may/feature_association.html

  12. Terra Says:

    If members REALLY want to know what’s going on or are concerned with how their measly yearly dues (gee, $3.75 per month) are being spent or how it affects THEIR rights as a pilot…which is why they are members…they should look at the website and read their magazine. How many cups of coffee do you think you would have to buy before reading just the AOPA magazine from cover to cover…I guarantee you’d spend more on the coffee than they spent on the magazine itself…not to mention the entire entourage of complimentary staff and services that are just a phone call away, travel discounts, and government advocates that fight for you daily to boot. There is no way I could afford to pay an attorney every time I have a legal question about flying or my medical; there is no way I could afford to pay a doctor each time I need to find out if a particular pill is okay to take and still fly because I’ve got the sniffles (not that they’d know); there is no other company that I can find that will provide life insurance that covers me when I’m flying. I make my dues back each year and then some just by getting AOPA discounts at FBO’s for fuel, car rentals, insurance and training benefits. Those complaining that the dues finally went up $6 after 20 years…REALLY??? No, really…I mean….REALLLLY?? Let me stop chuckling over that one! You’re willing to make Starbucks richer by buying a latte and scone, but you’re complaining about the cost of protecting your ability to fly? Starbucks is flying a few G550’s around, what do you have?

  13. Jess Reynolds Says:

    I am shocked to find out how much the top leaders of AOPA make. I am a flight instructor that can barely pay for the annual dues and was sad to find out they were raising the dues even. I’m not sure people who make this kind of money are really in touch with those who make so much less than they do. I feel a little upset that Fuller thinks he deserves this kind of salary. I understand that they are trying to pay enough to keep their employee’s but in actuality most companies these days would just let them go since there are probably 100’s out there that would do the same for MUCH less. I feel that we as a nation are just in a mind frame of entitlement and not in the right mind frame of service. There are those that would most likely do Fullers job for free because they believe in general aviation enough to not need a salary. We need more individuals like Jet Blue’s former leader who donated his entire salary of around 250K (which is so much less that any airline out there) each year because he felt that he was self sufficient and didn’t need any more. We just have prideful, greedy leaders that I question if they are doing this because they actually believe in GA or if they are in it for the money.

  14. Yankie Says:

    I am doing the same as TOM!

    I am deeply saddened by the direction AOPA has taken in the last couple of years and this latest issue has convinced me that former lobbyist and now AOPA President Craig Fuller has the same condescending attitude towards his constituents (AOPA members) as does Congress (taxpayers).

    So I am voting with my wallet and have informed AOPA to cancel my membership.

    -TOM

  15. H. W. Sharp Says:

    I am pleased to see the base salaries published. I am reserving judgment until I see the rest of the compensation package, we want to see the whole picture, bonuses, perk values, and the like. It is time for a bit more transparency. We want to see exactly where the profits from the “Wine of the Month” club are being spent?

  16. Kyle Says:

    I agree with a previous poster who says that the passion for aviation should be the primary motivation for somone being interested in running the association. Pay should be second. For a truly excellent president, passion will beat pay any day.

    In the past, there has been no chance I would cancel, and I will not be canceling my membership (11 yrs and counting) this year, but will look very closely at next years pay schedule. I didn’t join to make someone rich, especially when I am lucky to afford flying a few times a year.

    AOPA leadership, if you are passionate about the cause, you will make a change. If you are not, we didn’t want you anyway.

  17. Tom Says:

    I second Mr. Sharp’s request that the entire compensation package for the AOPA leadership be disclosed (not just “base salaries”). If this compensation is fair and above-board, the management should have no hesitation in making it public. Again, as an AOPA member, I formally request this information.

    Tom

  18. Trevor Evans Says:

    My question would be, why be so defensive and why avoid talking with AV Web in the first place about this? As someone who works in PR and Marketing I would assume that the reason for avoiding the issue is that the Upper Management are aware that the salaries are on the high side and as an Association, which is supposed to be driven by a passion for their purpose, they know they will be criticized by the membership regarding this. Listen, everyone is fully aware that you need to pay good money for good people and that large multinational corporations pay their executives high salaries, but this is an association, which is supposed to be an advocacy, the purpose of which is not to drive profits for the shareholders but to drive the concerns of their membership to the powers that be. Associations and not for profit organizations are seen in a different light than corporate money making organizations, therefore it is normally expected that the executives of these types of organizations will be driven more by passion than by dollars, but clearly AOPA Executives see themselves as Corporate America and expected to be compensated as such. No member expects that we will pay peanuts for monkeys, but we do expect some fiscal restraint when it comes to Executive Compensation for Management in an advocacy association. The mere fact that Fuller initially tried to avoid the interview, then became inflamed by AVWeb publishing the figures that AOPA itself has filled on record with the IRS, is grounds for concern. Claiming that the factual figures “don’t tell the whole story” and that “…we can explain, you don’t understand”, just doesn’t hold water with me. In the PR world we call this damage control and I think that AOPA Members are entitled to understand why the Top Executives at AOPA feel that ‘Damage Control” is necessary. AOPA does a great job, don’t get me wrong, as does EAA, but sometimes these organizations need a wake up call. With Millions of dollars in the treasury, perhaps money could be spent on a General PR or Advertising Campaign in Mainstream Media about the role of GA in the Community, rather than justifying and defending high Executive Salaries and criticizing media organizations for bringing these salaries to the attention of the pilot community.

  19. Rob Morgan Says:

    Let’s see the whole compensation package. What were the average bonuses (5, 10, 20%)? What about deferred compensation? 401K contributions? Does AOPA offer 457b packages to the execs (some associations do)?

    Base salaries are the smoke….where there is smoke….there is fire.

    Next question: What is the tenure of each of these highly paid execs? Is this a country club environment where you stay forever and enjoy the compounding of the annual 3-7% pay raises. Perhaps AOPA should approach hiring like corporate America, if you get too expensive, you are let go.

    I’d like to see the flight logs for N4GA publish; business only? Or are we combining it with pleasure like Mr Boyer used to do?

    If this post makes you a bit uncomfortable, then perhaps you are doing something you shouldn’t be doing.

  20. Parth S Says:

    I am a life member, so cancellation is not an option for me. Anyway… I chose to become a life member because I was convinced that AOPA is one of the best run organizations there is, period. You look at the staggering challenges facing us, we keep squeaking by and I am sure AOPA’s management listed above has at least a small role in that.

    We are in a tricky position of making qualitative inference from quantitative data. How could we say, “by spending $1M less on salaries or other benefits we could have still kept user fees at bay?”

    But I would urge AOPA to use this opportunity to engage in TRANSPARENCY and REFORM, wherever possible and necessary, in the spirit of what — and whom — you represent. Students and CFIs scraping by. Thousands of small businesses living on a shrinking opportunity pool. All who believe in your leadership, and contribute in so many ways to your revenues.

    Craig and the team, I know you can do it.

Leave a Reply

*