POLITICS MAY 4, 1992
Heard the latest one about William Aramony, the ousted head of the United Way of America?... He took at the office.
If ever there was a scandal for the ‘90s, this was it. The president of America’s largest charity, William Aramony, was suddenly unmasked as a limo-riding, Concorde-flying tycoon. Not only has the reputation of the most successful charity head in the nation’s history been tarnished, maybe irredeemably, but with all the sensationalism, the crux of the matter has been entirely unexamined: Is it really wrong for the head of the nation’s most efficient multibillion-dollar charity to earn a big salary?
Now, I must point out in the interest of full disclosure that I’m distantly related to Aramony by marriage. I may be compromised, but I also had the opportunity to witness the development of a full-blown scandal from a rare vantage point.
Once The Washington Post broke the story of what it called Aramony’s “lavish,” “grandiose” lifestyle, his fate was sealed. His salary was $369,000–a large chunk of change by any measure—and it just plain looked bad. And the Post, The New York Times, and later the networks and everyone else chose to use the even more grating figure of $473,000, his salary plus his pension and health care benefits. What they failed to explain is that with a tenure of twenty-two years, he’s the longest-serving head of a major charity, and that his salary and perks, far from being aberrant, are close to the norm among the big charities.
The United Way board hitherto had been delighted with Aramony’s performance, giving him an average pay raise of 6 percent pay a year (although last year he chose not to take it). But early on, the board sensed that this was playing out as a personality-driven scandal. Far easier, after all, for the press to focus on one bad apple than the whole barrel, or the larger, more complex issue of executive compensation in charity. As the scandal grew, the board was faced with two choices: either downplay the thing—and risk further opprobrium—or scapegoat Aramony. They chose the latter option, in hopes of saving the charity, and imposed a gag order on him. Fortunately, no one in the press got hold of the confidential minutes of the September 12, 1990, United Way board meeting—chaired by John Akers—which proved that Akers supported Aramony’s salary and pension package.
Then Akers brought in one of his IBM vice presidents, Kenneth Dam, as interim president to replace Aramony. Dam, it was announced, was serving without salary. No one mentioned that he continued to draw a six-figure salary from IBM. (Dam refused to tell me what it is.) Soon Dam was publicly castigating his predecessor: “Instead of leaving behind a legacy of important and lasting contributions to social service, he left behind a national problem.”
The board rushed through an independent investigation strongly critical of Aramony, denying him access to its findings until after the report had been distributed to the media. In any case, most of the accusations were impossible to defend against in a trial by sound bite. Take the business of his riding around in a black stretch limousine. A Ford sedan with a driver isn't exactly a “limousine,” but the United Way did hire a car and driver while Aramony and other top executives were in New York. As any executive who has ever had to get through a day of back-to-back appointments in New York can tell you, sometimes it's more efficient (and even cheaper) to have a car and driver at your disposal than standing around on Manhattan streetcorners trying to hail a cab. But try telling that to a TV audience of a few million fed-up New Yorkers who have to suffer the urine stench of the D train twice a day.
As for the business about Aramony having “diverted” United Way funds to buy a condo for himself in New York, it sounds downright sleazy, but there’s a good explanation—which the United Way's report didn’t offer. Instead of having the United Way pay the exorbitant rates of Manhattan hotels, Aramony—who went to New York on business regularly—had the organization rent a condo in the city, since it was cheaper. Soon it became clear that it made more fiscal sense to buy one.
Ted Koppel was right when he pointed out on “Nightline” that every time Aramony (or for that matter, any other United Way employee) did anything, it was money taken out of others’ pockets. That's called “overhead,” although charities don’t like using the word. The truth is that under Aramony, the United Way has been the leanest national charity by far, with expenses of less than 14 percent per year; compare that with the American Cancer Society’s 22 percent, the March of Dimes’s 28 percent, or the Epilepsy Foundation of America’s 33 percent.
It's not surprising, then, that throughout the Aramony affair the heads of the nation’s other major charities decided to lie low, hoping the Times wouldn’t call. Elizabeth Dole, for example, in her first salaried year as president of the American Red Cross, is making over $200,000. The head of the American Heart Association earns $246,000, and the head of the Muscular Dystrophy Association $285,000. All have been in office for far less time than Aramony. Nor do the heads of foundations live hand to mouth. The president of the Ford Foundation makes $422,000 a year; the head of the J. Paul Getty Trust makes $509,000. And of course executive compensation in the private sector is in another league entirely. As CEO of IBM, Akers took in $7.4 million in 1990. Obviously you weren't going to see him rushing to defend Aramony’s salary.
For some reason, people seem to be more offended at the $369,000 that Aramony made for raising more than $3 billion last year than at the $3 million Lee Iacocca made last year for losing $795 million for Chrysler. Aramony has spent his entire thirty-eight-year career in the benevolence biz. Even the most vocal of his critics these days concede that he was the most successful charity head in American history. Twenty-two years ago, when he became president, the United Way was a loose, $700-million-a-year alliance of community chests. Aramony devised a system of corporate payroll deductions and secured corporate sponsorship (getting, for instance, the National Football League to donate $50 million worth of prime-time TV ads a year), along the way raising some $35 billion for the needy. He could easily have made ten or twenty times his yearly salary in the private sector.
It makes us queasy to think of charity leaders making a lot of money, because we instinctively believe that doing good shouldn't be materially rewarded—that making money contaminates the spirit of giving. The assumption is that if you want to help the poor, and your motives are “pure,” you should be poor yourself. We're uncomfortable with the notion of do-gooders doing well; we’re heirs to the Emersonian notion of the nobility of poverty.
Think of it, instead, as a purely pragmatic matter. American charities have grown into extraordinarily complex multibillion-dollar enterprises. No other country in the world relies on the nonprofit sector to provide human services to the extent we do. Especially since the Reagan-Bush cutbacks in social services, we depend on charities to do what our government won't. The time of the mendicant friars who took vows of poverty is long past.
Effective charity heads (and there aren’t many of them) must possess the talents of a successful corporate CEO. It’s not enough to want to do good; they need to be managers, spokesmen, schmoozers, innovators, even visionaries. Painful as it may be for some to contemplate, the last few decades have seen the professionalization of charities. It’s not just for amateurs anymore.
Joseph Finder, the author of The Moscow Club (Viking), writes frequently on international affairs. This article appeared in the May 4, 1992, issue of the magazine.