J. Brady Lum is a full-time employee of Special Olympics International (SOI), serving as its president and chief operating officer (COO). He even signs off on the organization’s tax form. But, The Coca-Cola Company in Atlanta, Ga., pays him and the compensation apparently is as secret as the formula for Coke.
The Washington, D.C.-headquartered organization’s Internal Revenue Service (IRS) Form 990 provides the compensation of more than a dozen SOI executives, including that of Tim Shriver, the president and chief executive officer (CEO). At first glance, it would appear Lum is paid nothing, however, in the accompanying tax form notes it is made clear he is “compensated by The Coca-Cola Company for his services provided to SOI.”
Shriver earned total compensation of $220,162, including base compensation of $199,675. Several other executives listed on the 2010 Form 990 — the most recent available — earned more but most ranged between $160,000 and $280,000.
Kirsten Seckler, vice president, branding and communications for SOI, said she was unaware of any other nonprofits that have similar arrangements with any of their executives. “It is unique but we are transparent,” she said.
Ken Berger, president and CEO of Charity Navigator, described the arrangement as a way to keep administrative costs down. The Glen Rock, N.J.-based charity evaluator awarded Special Olympics a four-star rating overall, with three stars for financial and four stars for accountability and transparency.
“I would lean in the direction I think most donors would — if they can get a third party to cover those costs, more power to them. As usual, I think the devil is in the details. What does this person really do with their time for the charity and, what are the assurances provided to minimize conflict of interest? That is a thorny issue indeed,” Berger said.
Nonprofit boards make so many decisions that it’s often hard to define a norm in the industry. However, it’s not something that Heather Eddy has seen before.
“I’d call it outside the realm of best practice and something that will likely bubble up as an issue down the line,” said Eddy, president and chief operating officer in the Chicago office of The Alford Group Executive Search. “It begs the question of transparency and judgment on behalf of the board (and Lum). I think his actual salary should still be listed and the offset with a gift of the same amount,” she said. “Whenever the position next becomes open, it will put the board in an awkward position of having to answer questions and recalibrate the scale for compensation as any incoming leader will wonder why they aren’t being paid what he was paid.” The organization’s chairman and board of directors “are comfortable with the plans we have in place for succession,” said Seckler.
Contractually, SOI does not talk about terms of its agreement with Coca-Cola without the company’s permission, Seckler said, which it did not give.
SOI’s Form 990 for 2010 indicates that Coca-Cola, a founding partner of SOI, made aggregate contributions to the charity of $2.18 million.
The arrangement with Lum came about when a member of SOI’s board of directors — in search of a new president — saw an opportunity where Coca-Cola “could help out further than what they had been,” so they had made a recommendation to offer one of their executives to serve in that position, according to Seckler.
Through the SOI spokeswoman, Coca-Cola said it could not disclose specific details of Lum’s employment, issuing a statement that said much the same thing: “When Special Olympics was searching for a new president and COO, The Coca-Cola Company saw an opportunity to strengthen its longstanding partnership with the organization by providing executive leadership to fill that position. This arrangement is one part of our support, which is a combination of monetary, value in-kind, employee engagement and activations around many Special Olympics properties We are delighted that Special Olympics has found this innovative approach to bringing value to our partners beneficial to their organization.”
Lum reports to Shriver, son of the late SOI founder Eunice Kennedy Shriver. He was appointed president and COO in May 2008 as Coca-Cola was renewing its partnership with SOI. The worldwide sponsorship commitment covered 2008-20011, and included cash, in-kind precuts, services, technical support, marketing and fundraising support. He has experience with nonprofits, serving as chair of the board of the national Hands On Network, including strategic planning committee chair of Hands On Network and POL Foundation.
Before Lum, Bruce Pasternack served as president and CEO between 2005 and 2008. He joined the charity from consulting firm Booz Allen Hamilton, where he had been senior vice president and managing partner of its San Francisco office. He also has served on the charity’s board since March 2000. Pasternack earned $294,671 in total compensation in his final year as CEO, according to the Form 990.
Lum spent 15 years at Coca-Cola in a variety of senior management positions. He led the integration of Coca-Cola’s “Manifesto for Growth,” described by the company as “a global initiative to recast its mission, vision and capabilities.”
It’s that experience with an iconic global marketing giant that Seckler said has benefited SOI, particularly with the nonprofit’s recent five-year strategic plan and its expansion globally. Since 2000, SOI has gone from a centralized organization in Washington, D.C., to a decentralized organization with seven regional offices around the globe, shifting from a primarily U.S.-based charity to one where three-quarters of the athletes are now from outside the U.S.
“With all of this expansion in so many different areas, we were going from a very family-run nonprofit to a global nonprofit that needed the expertise and insight of some of the best global-growing companies in the world. (Coca-Cola) is a great global partner that we’ve been able to learn from,” Seckler said.
“That shift in our growth, that shift in our work, the fact that we were becoming a more global organization than U.S.-based, it really helped utilizing Coke’s expertise in this area more and more, and how they saw an opportunity to use their expertise to help us grow,” Seckler said.
The new strategic plan, launched last year, was a collaboration among affiliates, regional offices and other participants, the first time it was not driven solely by headquarters. “Coke’s unique model, and way they’re structured around the world helped us take a hard look at how we could be collaborative and integrative throughout our entire system,” she said. NPT