Debt-Ridden Boston Archdiocese Pays Lay Execs $3.7M, Violates Fiduciary Responsibility and Motu Proprio

The Boston Archdicoese, saddled with $137 million in debt and operating deficits of $11 million in the past two years, paid their top lay executives $3.7M in salaries and benefits in the past year. They acknowledge many are overpaid, and to add insult to injury, they even gave raises to some overpaid execs last year. This excessive spending on salaries violates the diocese’s fiduciary responsibility to make proper use of donor funds, and it also violates the recent Motu Proprio from the Pope Benedict XVI. Because the Massachusetts Attorney General has oversight for Non-Profits and their use of donor funds, she has reason to intervene.  Meanwhile, Cardinal O’Malley appears to be fiddling, as the fiscal and moral version of “Rome” is burning.

There is enough content here to take multiple blog posts. We will cover as much as possible today and continue in subsequent posts.  That Boston was paying excessive six figure salaries to lay execs has been a public complaint for more than three years. That nothing is being done about it, even with the window-dressing of a “Compensation Committee” formed in 2010 is an even bigger travesty, especially even after publication of the Pope’s “Motu Proprio.” First we cover the “Motu Proprio” and diocesan code of conduct guidelines, then the salaries, the Compensation Committee report, and then examples.

“Motu Proprio”

Signed on November 11, 2012 by Pope Benedict XVI and officially in effect December 10, 2012, the Motu Proprio says salaries need to be in due proportion to analagous expenses of the diocesan curia.

§ 4. In a particular way, the Bishop is to see that the management of initiatives dependent on him offers a testimony of Christian simplicity of life. To this end, he will ensure that salaries and operational expenses, while respecting the demands of justice and a necessary level of professionalism, are in due proportion to analogous expenses of his diocesan Curia.

Priests in the Boston curia are paid about $41K annually.  How can anyone in the Boston Archdiocese claim that the $300K+ salaries of their top execs are in “due proportion” to the analogous expenses of the diocesan Curia? Here is our December blog post describing the violation.

Archdiocesan Code of Conduct

The diocesan Code of Conduct says:

“Church Personnel will be responsible stewards of the resources, human and financial, of the Archdiocese and any Archdiocesan Affiliated Organization with  which they are associated, observing both canon and civil law, and making decisions concerning the disposition of resources that reflect Catholic social teaching.”

Salaries Disclosed in 2012 Annual Report

The 2012 Annual Report released on Friday, January 18, reports that 16 lay executives are paid more than $150,000 a year, and on top of that, another 10 are paid $100K or more a year. The salaries of the top-paid execs can be found in pages 77-82 of the pdf.  12 of the 16 people paid $150K+ are listed in the report, but it is easy for anyone to determine with high certainty who the other 4 are from the Pastoral Center directory based on titles.  (BCI knows several are paid $200K+ and the others a little less than $200K, so we assumed an average of $200K for their salaries in the table below).  To make it easier for you to see all 16, we have arranged the publicly available data in the table below (click on image to zoom):

Compensation Committee Report

The short version of the story here is that the “Compensation Committee” formed in November 2010 to study compensation and address the complaints about excessive six-figure salaries spent tens of thousands of dollars of donor funds and accomplished next to nothing.  Their “report,” if you can call it that, is on page 83 of the Annual Report.  They hired a consultant, AON, to do a study, which probably cost a minimum of $30K.

“We determined that the competitive environment varies by position. Depending on the job, the arena in which we compete for talent includes some or all of the following: other Catholic organizations, other not-for-profit groups, and for-profit organizations. The peer group against which we measure ourselves is tailored for each position. The consultants accessed numerous data bases containing applicable information, and conducted a custom survey of Catholic dioceses. The results of the study are as follows:

a. Six of the senior lay executives are paid between the 50th and the 75th percentiles;
b. Five of the positions have attributes that are unique to our Archdiocese, and are paid comparably to peers in the Archdiocese with similar levels of responsibility; and
c. Five of the senior lay executives are paid above the 75th percentile.

“The Committee believes that, over time, most senior lay executive positions should be paid at approximately the median compensation (or 50th percentile) identified in the salary study, as updated from time to time.”  There is more, but wait a moment.

In other words, a) 6 of 16 people are slightly to somewhat overpaid, c) 5 of 16 people are way overpaid (note, there is no upper limit specified, so some could be off the charts overpaid), and b) 5 other people are overpaid comparably to their Boston Archdiocesan peers who are overpaid, but we justify it based on their “unique attributes.”

Hmm.

Now the “unique attributes” justification:

“There are, however, factors that may require pay at levels that differ from the median, and the amount any particular individual is paid should reflect such factors. These include the nature of an individual’s experience to include the time and performance in the role, the uniqueness of an individual’s qualifications, the scope of the position relative to those included in the salary study, the strategic importance of the position, and the urgency and seriousness of any problems that need to be addressed. All individuals in the group are currently paid at a level that is consistent with our compensation philosophy.”

So, once they determined that basically everyone was overpaid, then they apparently created a “compensation philosophy” to justify overpaying everyone. That philosophy is summed up here:

“Our philosophy is based on the belief that senior lay executives are employed by the Archdiocese to advance the mission of the Church, and that accomplishing this goal requires competent, compassionate, efficient and effective leadership. The purpose of the compensation system is to enable the Archdiocese to attract and retain individuals whose personal goals and achievements are in harmony with the Church’s teachings, and whose motivation, talents and capabilities will assist the Church in achieving its objectives. This means that our pay practices must be: (i) competitive, so that we are able to hire people with the requisite qualifications; (ii) equitable, so that our employees are paid fairly relative to one another; and (iii) realistic, so that they reflect economic conditions in the Archdiocese and in the wider world.”

Without seeing the actual AON study, there is no proof they achieved (i) or (ii) and lots of other evidence they did not, and it is abundantly clear they have not achieved a compensation scheme that reflects the economic conditions in this archdiocese, where 40-50% of parishes cannot pay their bills and Central Operations lost $11M in the past 2 years. They apparently missed the “Motu Proprio” and should go back to work to add a new item “(iv) pay in due proportion to analogous expenses of the Boston diocesan Curia.”

The poster-child for excessive compensation, Mary Grassa O’Neill (see “Up in alms over salaries”), is perhaps the highest-paid lay Catholic diocesan employee in the country, making far more than public school superintendents in New York and Los Angeles who have 10X+ more responsibility. She just had her pay upped from $325K to $341K. Just one more quick example of the evidence they are over-paying is:

Carol Gustavson: Executive Director Lay Benefits: $169,190. A proud ex-Catholic whose previous experience was as a labor attorney for a newspaper. When they slashed lay pensions in 2011, readers reported she was unable to respond to basic questions about pensions in the public meetings. As reported here, she was making $149,999 before her job as Executive Director of HR was reduced by about 2/3 in 2011. Other archdioceses we surveyed said they were not paying their head of HR nearly what Carol was making when she was responsible for HR and paid $149,999–coincidentally, just enough to fall below the $150K limit for reporting in past years.   Jim DiFrancesco is “Director of Human Resources” and Carol is largely just responsible for Pension/Medical Trust (minus the prior work of dealing with plans for 10,000 Caritas Christi employees who now are Steward Healthcare’s responsibility).  A pension/medical plan administrator for an archdiocese like Boston makes around $80-85K.  Amount of excessive pay: $70-80K.  Oh, we forgot, she is also responsible for bringing yoga into the Pastoral Center.

The whole situation is frankly, preposterous.  It will take us multiple blog posts to address the depth of the problem.  Now that the Boston Archdiocese has just finished giving fat raises to most of overpaid people (a topic for the next post), all the Compensation Committee is doing is the following:

At the Committee’s recommendation, no merit increase was granted for FY 2013 to any member of the senior lay executive group whose salary was at or above the applicable median. In the future, compensation should be limited to levels that satisfy our compensation philosophy through tools such as renegotiation of contracts, sunsetting of current pay and/or salary freezes.

In the future?  How about in the present while the archdiocese is $137M in debt (not counting the $50M in lay benefits owed to former employees, off the books entirely now), is running a $6M annual operating loss, and has half the parishes in the red? Why not immediately start reducing salaries by 10% as of 90 days from now, with successive 10% cuts every 90 days until they get overpaid execs where they need to be?

Every Catholic, plus the Attorney General and Vatican should be up in arms about this financial scandal. If you care about the future ability of the Boston Archdiocese to carry on the saving mission of Jesus Christ, click below to send a copy of this blog post via email to the Papal Nuncio  [nuntiususa@nuntiususa.org] the Massachusetts Attorney General Division of Public Charities [charities@state.ma.us] and the Boston Globe [newstip@globe.com].