Charities Fear New Pay Limits Will Hurt Executive Donations
Feb. 17, 2009, Wall Street Journal — Nonprofits already face the prospect of fewer donations amid turmoil at Wall Street firms and other companies. Now, they could face another donation deterrent: Washington's plans to curb executive pay.
Americans gave more than $300 billion to charity in 2007, according to the most recent figures. Some of the largest gifts from that pot have come from wealthy Wall Street bosses.
Now nonprofit leaders, especially in and around New York's financial hub, are worried these big donors could feel squeezed further amid government edicts to limit pay packages.
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The economic stimulus package President Barack Obama is expected to sign Tuesday includes a measure barring any firms that have received federal bailout money from paying top earners bonuses exceeding more than one-third of their total yearly compensation. The measure also empowers the Treasury Secretary to "claw back" previous bonuses in certain instances if they're deemed excessive. It remains unclear exactly how the rules will be implemented, raising questions about corporate America's future compensation practices.
"As long as there is uncertainty about what's going to happen with executive compensation, that could really hold a lot of people back from giving, and not just on Wall Street," says Melissa Berman, president and chief executive of Rockefeller Philanthropy Advisors.
Of course, Wall Street executives, and employees lower on the ladder, still have more resources to give than many Americans. But they, like everyone else, are feeling less wealthy these days amid the financial crisis. In some cases, they're telling charities they can't be as generous as they've been in the past. The new compensation regulations could give them another justification for scaling back giving.
Jilly Stephens, executive director of City Harvest, a New York charity that combats hunger, says giving isn't driven solely by how much people earn. But, she says, it remains her "job to be worried" about finding alternative funding sources as dependable Wall Street bonuses dry up.