High executive pay at Goodwill Omaha — higher than at other Omaha nonprofits, and higher than at most comparable Goodwills around the country — hurts the organization’s ability to carry out its mission.

By Henry J. Cordes / World-Herald staff writer

Saturday, October 22, 2016

Goodwill Industries touts that simply by donating your old couch, ill-fitting jeans or other of life’s discards, you help the charity find jobs for people with disabilities or other barriers to work.
But when you donate to or buy from Goodwill’s thrift stores in Omaha, your efforts contribute more to something less charitable: some of the most staggering executive pay you’ll find in the nonprofit world.
Federal tax records show that Omaha’s Goodwill in 2014 paid CEO Frank McGree total compensation of $933,444. On top of his $250,000 base salary that year, he received a $95,000 incentive bonus, $52,000 in deferred retirement pay he’ll collect later, and a special retention bonus of $519,000. He even was given a country club membership.
And McGree is far from the only executive at the Omaha nonprofit taking home enviable pay. Tax records show Omaha’s Goodwill that year paid salaries of $100,000 or more to 13 of its executives and managers — a number that increased to 14 last year.
It turns out that out of the millions Goodwill Omaha generates each year selling your donated goods, the charity puts more of those dollars into pay for its leaders than it does the jobs programs that are the basis of its nonprofit mission and tax-exempt status.
Goodwill Omaha officials, in a written statement, defended the pay to McGree and other top leaders. McGree’s compensation, they said, recognizes his three-decade performance leading a complex and growing $30 million organization with almost 600 employees. They emphasized that $519,000 payment to McGree was one-time money, not an annual payment, and part of a 20-year-old retention agreement that encouraged him to stay here.

Frank McGree’s 2014 pay

Base pay$249,948
Retention bonus519,000
Incentive bonus95,000
Retirement and deferred pay52,000
Other compensation*3,688
Total compensation933,444

* Likely includes country club membership

“We are competing in the marketplace for top-notch executive talent who can effectively manage a multimillion-dollar operation,” said Joe Lempka, chairman of Goodwill’s board. “Frank has not only grown the agency significantly since his start nearly 30 years ago, he has helped Goodwill serve tens of thousands of people, and helped countless others find jobs, often during very difficult economic times.”
Goodwill represents one of the most recognizable nonprofits in the community. Who hasn’t shopped there or dropped off stuff that was no longer needed? And to be sure, the charity has done much good.
The charity’s stores also compete in the retail industry, where top corporate executives can earn salaries in the millions.
Unlike Walmarts and Dollar Generals, however, Goodwill is a public charity, for which it enjoys valuable tax exemptions. And it’s legally required to use its assets for public good, not private gain.

A four-month World-Herald investigation found that not only does Goodwill Omaha’s corporate-style executive pay stand out among nonprofits, but the way the charity has operated also raises questions whether it has strayed from its mission of serving our region’s disabled and hard-to-employ citizens. Consider:

» While Goodwill Omaha runs job training and assistance programs that serve thousands annually, nearly all of those activities have been funded by government grants and contracts — not the $4 million in annual profits generated by Goodwill’s thrift stores in eastern Nebraska and western Iowa. Even its signature program that employs disabled job trainees within its stores is primarily funded by school districts. Goodwill officials identified only $557,000 in jobs program spending in 2015 that was funded by retail sales. Most store profits are being consumed by administrative overhead, which includes much of the pay to its top leaders.
» That big half-million-dollar payment McGree received — a retention bonus certainly unusual in the nonprofit world — pushed his total compensation that year into the top stratum of nonprofit pay anywhere in the country.
» Even discounting his one-time retention bonus in 2014, McGree’s $400,000-plus in annual pay, benefits and perks was more than double the average pay for the leaders of the other widely known social service nonprofits in Omaha, and almost 50 percent above the next closest in pay.
» Among the more than 150 independent U.S. affiliates of Goodwill Industries International, McGree’s pay stands out, with or without the big retention bonus. Still, he is far from the only Goodwill CEO pulling down such a large pay package. Nationally, leaders of two Goodwill affiliates recently received pay topping $1 million, two dozen make over $400,000 a year, and big annual bonuses are common. Executive pay among the affiliates varies widely, however, and some pay their CEOs much less.
» Few charities can match Goodwill Omaha when it comes to the total number of executives and managers paid $100,000 or above. Goodwill Omaha’s total of 13 in 2014 equaled the combined total that year for five major Omaha-area social service nonprofits: United Way, Salvation Army, Habitat for Humanity, Catholic Charities and Lutheran Family Services. The World-Herald also found that, for its size, Goodwill Omaha had more leaders paid in six figures than any of the nation’s 78 largest Goodwill affiliates.

2014 CEO pay for Omaha social service charities

CharityCEOTotal CEO compensation% CEO payEmployees paid more than $100,000Budget in millions
Goodwill Omaha Frank McGree $933,444 3.1 13 $29.8
United Way of the Midlands* Karen Bricklemyer 280,305 1.2 5 23.1
Lutheran Family Services Ruth Henrichs 208,393 1.0 3 20.8
Heartland Family Service John Jeanetta 189,572 0.8 4 23.2
Catholic Charities John Griffith 167,623 1.1 1 15.2
Habitat for Humanity Amanda Brewer 145,050 1.0 2 14.7
Food Bank for the Heartland Susan Ogborn 124,793 0.5 1 23.3
Salvation Army (western division) Maj. Paul Fleeman 89,096 0.2 2 45.3
Average (excluding Goodwill) $172,119 0.7 2.6 $23.7

* United Way of the Midlands was transitioning leaders in 2014 due to the death of CEO Karen Bricklemyer, so her pay for 2013 is used in this comparison.

Source: Organization IRS 990 filings for 2014, accessed online. Salvation Army is considered a church and does not file a 990. Figures for 2014 provided by charity.

» Goodwill Omaha’s pay practices bear no resemblance at all to those of the two most comparably sized Goodwill affiliates in our region: Kansas City and Iowa City. Those affiliates provide a fraction of the executive pay and conversely devote more retail dollars toward their mission — for Iowa City, significantly more.
» Among Goodwill employees paid $100,000 is McGree’s daughter, a retail manager. There are a number of other related individuals in Goodwill’s well-paid upper ranks, including a vice president who is the daughter-in-law of a board member and another vice president who has a sister working under her.
» Executive pay at Goodwill Omaha stands in sharp contrast to the compensation of its rank-and-file workers, made up largely of relatively low-paid store managers and social workers and store clerks paid little more than minimum wage. Federal records show the nonprofit also recently has paid less than the minimum wage to 110 workers with significant disabilities — legal under a controversial federal law that allows such “subminimum” wages for the disabled.
» Goodwill Omaha has earned money in recent years by contracting with a metro-area beauty supply company to repack Chinese-made hair rollers into plastic bags for resale. The bags are labeled “Made in America” in apparent violation of federal labeling standards.

As part of its inquiry, The World-Herald interviewed more than a dozen former Goodwill employees who expressed concerns that Goodwill Omaha has strayed from its mission. Many said that maximizing profits and supporting executive pay have taken precedence over helping the region’s disabled and disadvantaged citizens attain employment.

“There are some people in administration on executive staff that it just seemed wanted to come up with quicker and easier and better ways for them to make money,” said one former job trainer, who, like the others, spoke on condition of anonymity. “It just started to be more about the money than the mission.”
Said another employee: “It really felt like the focus was on the executives’ pockets rather than the mission.”
Getting answers from Goodwill about questions raised by The World-Herald’s investigation has been difficult.
Goodwill Omaha officials refused World-Herald requests to interview McGree or members of its board of directors, who by law set McGree’s pay. Goodwill also refused to answer specific questions, providing only general written statements related to executive pay, its funding of mission programs and the good it does in the community.

“At Goodwill, we often refer to ourselves as a caring community enterprise,” McGree said in the prepared statement. “We exist to serve the training and employment needs of our disadvantaged citizens, and we do that primarily through an effective and profitable business model utilizing a network of 17 successful area retail stores.”
Goodwill Industries International, the umbrella organization over Goodwill’s national affiliates, also refused to answer questions. The national charity, overseeing affiliates whose annual total sales approach $4 billion, would not even provide The World-Herald a list of its regional affiliates.

The series

Day 2: Monday
» Omaha charity takes a different approach from its regional counterparts in spending and serving the public.
» Interviews with former employees reveal frustration with what they see as a broken culture, Matthew Hansen writes.
Day 3: Tuesday
» County assessor and some County Board members say Omaha Goodwill’s tax exemptions may come under scrutiny.
» Columnist Matthew Hansen addresses some of the unanswered questions about Goodwill Omaha.

When briefed on The World-Herald’s findings, both Goodwill patrons and advocates for those served by Goodwill programs expressed surprise, disappointment and anger.
Mary McHale’s ties to Goodwill in Omaha run deep. Her late father years ago served on its board. More recently, her son, Daniel, who was born with Down syndrome, participated in a summer job training program at Goodwill.
McHale praised the commitment and the passion of the Goodwill trainers who taught Daniel how to apply and interview for a job and the basics of holding a job, from being on time and following directions to staying on task. The 18-year-old beamed with pride over receiving his first paycheck.
“The trainers were great,” McHale said. “They are definitely committed and passionate about making people employable.”
However, as with many Goodwill programs, the funding for Daniel’s program came from a government grant, not store revenues.
McHale was startled when she heard of Goodwill’s pay practices and finances.
“For here in Omaha?” she asked in reaction to McGree’s pay.
“Wow, it makes me sad,” she said after hearing how Goodwill funds its job programs. “You’re going to tell me there’s no Santa Claus.”
Mary Larson, a bank examiner, for years has filled a blue plastic tub with clothes she no longer wants and periodically lugged it to the Goodwill near 156th Street and West Maple Road.
She won’t do that any more, after learning from The World-Herald about Goodwill Omaha’s spiraling executive pay and the relatively small amount of store profit that goes to help needy Omahans.
“I will no longer donate to Goodwill,” she said. “This is just unbelievable to me. Just unbelievable. How do they justify this? That’s what I want to know. How does anyone justify this?”
World-Herald staff writer Matthew Hansen contributed to this report., 402-444-1130

Goodwill Omaha executive pay: An investigative series

Share your thoughts