CEO salary at nonprofit Blue Shield of California should cause alarm

Nonprofit organizations have been under the media microscope in recent years due to the relative efficiency of their professional fundraising activities. With the media scrutiny has come improved public awareness and that is only to be applauded, nonprofits should be fluid enough to assess their overall fundraising costs and make adjustments to make the process as effective as possible. There is a balance to be found with expanding, which of course most nonprofits ultimately seek to do with managing the actual costs of fundraising itself. While there have been examples that the media have leaped on its worth reiterating that the vast majority of nonprofits practice fundraising activities that are ethical and make sense in the greater scheme of things. There’s also been a lot written recently about when not for profits should behave more like for profits and there is some currency too in that sentiment, a topic that merits further analysis.

However, the media seem a lot slower in picking up stories like today’s which has really made me gasp for air. Beyond fundraising costs, what about the operational costs and salaries; surely they deserve equal attention if the playing field really is looking to leveled wherever possible? In the case of Blue Shield of California they seem to have kept the title of nonprofit but elected to pay salaries that would not look of out place on Wall St, in fact they might seem misplaced in that environment many aspects of the economy still in the doldrums.

Blue Shield are one of the largest nonprofit health insurers in the US and they are by far the largest in California and its the revelations of the salaries of the board in California that should raise more than an eyebrow. A new state law has been passed that hopes to keep healthcare insurance costs under control and part of the the law requires the disclosure of salaries. This is the first time this information has been published and while it has caused some reaction in California I feel the story should be national.

The highest earner at Blue Shield California in 2010 was the CEO Bruce Bodaken who made a remarkable $4.6 million, which equates to $88,480 per week if you prefer it in a more digestible format. While I won’t deny the CEO of a large organization merits a healthy salary I wonder whether a cap should be considered? Let’s look at it another way, the largest for profit health insurer in California is Anthem Blue Cross, the salary of that company’s CEO? Less than 25% of the total earned for the equivalent role over at Blue Shield, who are of course the nonprofit organization.

In all the salaries of the ten highest earners at Blue Shield totaled over $14 million in 2010, even allowing for the income of Mr. Bodaken that still averages over $1.05 million each for the nine other executives. These levels of salary don’t belong at nonprofit organizations in my opinion, even sliced in half they’d still be out of line with the sector. Jamie Court the president of Santa Monica’s Consumer Watchdog agreed:

“It’s a totally out-of-proportion salary for a not-for-profit company. This is a salary that would quench the thirst of one of the Fortune 500 companies on Wall Street.”

Taking the news in a realistic way, our society rewards executive positions at large organizations, which is understandable. Its not a job that everyone is equipped to succeed in, also understandable. Running an organization as large as Blue Shield of California does take expertise, dedication and know-how. But $4.6 million worth? In an industry that due to costs many are uninsured? Blue Shield were quick to respond to the complaints explaining that the executive salaries fell well within the industry standards. If that is the case then perhaps the line between nonprofit and for profit executive salaries needs further analysis and public disclosure. For that at least, the ruling in California should be welcomed. Tellingly the response from Blue Shield said that salary was in line for similar roles throughout the profit and nonprofit sectors, surely that’s the point as there ought to some delineation between the two?

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