Compensation and the Jewish Question

Imagine a world in which high performing, high potential university graduates are recruited to work in Jewish communal institutions with the same attractive and compelling packages offered to their classmates going into finance or law or corporate work.

compensationBy Dr. Hal M. Lewis

That nagging little voice in my head kept begging me not to do this. “Don’t write it! It’s not worth the aggravation and the attacks that will follow.” I worried that penning this piece might, in fact, do more harm than good. As I contemplated the consequences of challenging the lieu commun regarding nonprofit executive compensation, I even considered pseudepigraphy for a moment, before rejecting it as too pusillanimous for my taste. It is not the personal opprobrium I was concerned about. I worried about the potential fallout publishing these thoughts might have on my institution, its trustees, faculty, and staff.

But in the end, it is for our students – those contemplating a career in the Jewish community, and those well on their way to positions of senior leadership – that I have chosen to set aside these concerns in order to raise questions about the all-too-commonplace bromide in Jewish life that executive salaries are too high. Driven in large measure by the Forward’s annual salary survey, the conventional wisdom now seems to be that too many nonprofit CEOs in the Jewish community are overpaid. The Forward appears to take great pride in outing those individuals whom they believe make too much money, based on a formula that considers only two factors: size of staff and size of budget. Writing in the Jewish Journal, Jared Sichal, describes reliance on such a simplistic approach as “questionable economics” that may, in fact, “not be fair.”

Significantly, the Forward is not alone. The recent statement of “Core Principles of Ethical Behavior,” assented to by more than 350 (mostly) rabbis and academics, proclaims, “The leaders of Jewish institutions and organizations should not receive excessive financial remuneration,” where the word “excessive” remains undefined.

Ironically, the concerns expressed in both the Forward and the “Core Principles” about CEO compensation obfuscate critically important issues in Jewish life that are screaming out for broad-based attention and action, including such things as gender inequity and the abuse of power by those in positions of leadership.

Underneath the accusatory tone and thinly veiled moralisms, lies the insinuation that Jewish communal professionals should by virtue of “serving” the Jewish people earn less than their for-profit analogues. Conflating excellent compensation with ethical infractions is destructive. Too many Jews have embraced what Dan Pallotta in Uncharitable brilliantly suggests is an inheritance from Puritanical and Calvinistic traditions. To wit, those who are compensated with “charitable” dollars must be remunerated at levels far below those found in other sectors.

There is a muckraking quality to these critiques, a kind of giant gotcha, mixed with just the right amount of sanctimony that is not only unseemly, but counter productive. “If you are a volunteer at one of these organizations, a client, a donor, an employer or an employee,” we are admonished, “you deserve this information.” As if boards, compensation committees, or anyone with a computer cannot already access the same data. When discussing those individuals whom they adjudge to be “underpaid,” the Forward sarcastically suggests that, perhaps, the less well compensated could improve their lot by aping the negotiating skills of those at the top of the list. The sardonic tone continues, “Or maybe those who are ‘underpaid’ are paid back by their work in ways beyond measure.”

While others are exceedingly vexed about high-earning CEOs in the Jewish community, I would suggest that such a consuming focus is the functional equivalent of Nero fiddling while Rome burns. We are living at a time of accelerated executive retirements, a dearth of talent, and a dramatic increase of young professionals leaving the field through the revolving door that leads right to the corporate world. If ever there were a case of misplaced priorities, this preoccupation with executive salaries seems the perfect example. [I am aware as I write this that some will dismiss these concerns because I too am a Jewish organizational CEO. So, full disclosure – my salary happens not to be listed in the Forward’s analysis, and if it were it would likely appear among the bottom 15-18 executives.]

To be clear, only a simpleton would suggest that search committees can magically find the most qualified candidate just by raising the compensation level. And any facile suggestion that non-competitive salaries are the only reason so many high-potential individuals are abandoning the Jewish employment market is feckless. But what is true – and I am sure of this because I hear it from my students and younger colleagues regularly – is that attempts to superimpose an expectation of limited earning capacity, couched in gently pietistic terms, turns off more talent than it attracts.

Today, to be the executive of a Jewish nonprofit organization, or even a senior-level professional, requires a variety of skill-sets, personality traits, aptitude, and artistry that are not readily obtainable, and certainly not available to the lowest bidder. Those who care deeply about the future of Jewish life, who recognize that we are confronted by challenges in our day that have never before been seen, should demand the highest quality professionals money can buy.

I understand, of course, that the linkage between salary and performance is not absolute, but in this rapidly changing Jewish world, where superior leadership matters more than ever, why would we suggest, as the signatories to the “Core Principles” have, that “Salary levels should correspond to a minimal portion of the budgets of those institutions?” (Curiously, though, perhaps to be expected, the phrase “minimal portion” is not defined.)

The mythology that social sector work is a zero sum game; that every dollar expended on salaries and benefits is a dollar not being spent on “services,” is fallacious and contrived. If the work that needs to be done requires, among many other things, raising enormous sums of money, and generating substantial revenue to enable the enterprise’s desired impact, how is it that anyone would recommend settling for less accomplished individuals, which is precisely what will happen if we adhere to the “minimal portion” stratagem? In our day, when even the most punctilious oversight bodies in American philanthropy have reexamined their positions on overhead, the rationale for clinging steadfastly to a vestige of the hoary past eludes me.

Nonprofit CEOs do not set their own salaries. This is the job of governance, whether a compensation committee, executive committee, search committee, or board. This is a process that organizational donors and volunteer leaders, those who know the organization best, take quite seriously. They study comps, understand the realities of their institution’s budget, establish metrics for evaluation, and more. I fail to understand how anyone with little knowledge of an enterprise beyond what they read on a Form 990, would feel entitled to determine fair compensation for that organization’s executive. Even the Forward’s advisor from Wharton has acknowledged (the hardly controversial notion) that, “Talent and skill have a sizeable effect on salary.”

Consider the devastating impact these self-righteous messages about salary levels are having on today’s enthusiastic and impassioned communal employees and those contemplating entering the field. The “minimal” salary proponents would have us recruit with the enchantingly pernicious phrase, “Come to work for the Jewish community, where salaries are low, and uninformed scrutiny predominates.” What we should be telling young talent is that as you rise through the organization, as your performance improves and your knowledge grows, you will receive new opportunities, and your salary will increase commensurate with the value you create. And no one, least of all self-appointed guardians of remunerative appropriateness from the outside, will have the power to impose or even insinuate artificial salary strictures. Imagine a world in which high performing, high potential university graduates are recruited to work in Jewish communal institutions with the same attractive and compelling packages offered to their classmates going into finance or law or corporate work.

For years our sanctuaries and boardrooms have resounded with the oft-heard complaint, ”We should run this place more like a business.” While not always what we’ve wanted to hear, and occasionally, just plain wrong, the reality is that increasing numbers of organizations have come to understand that they need executives with expanded repertoires, excellent fundraising skills, and increased sophistication in matters of finance, management and leadership in order to inspire trust among their manifold constituencies and funders. It is disingenuous for so many Jewish organizational critics, often the very first to demand the highest level of business acumen from their professionals, to persist in the belief that salaries should be limited in order to comport with some arbitrary notion of nonprofit propriety. This is hardly “running things like a business.”

As I suggest at the outset, there are a number of significant related issues embedded in the calls for restricted compensation that deserve the attention of thoughtful and capable leaders, women and men who can have an impact, who can build consensus, take risks, and lead change. But we will never make the progress we need to make if, out of some idyllic worldview, we excoriate, however furtively, a system that affirms the linkages between compensation and excellence.

Dr. Hal M. Lewis is the President and Chief Executive Officer of Spertus Institute for Jewish Learning and Leadership in Chicago. A recognized expert on Jewish leadership, he has published widely in the scholarly and popular press. His books include, “Models and Meanings in the History of Jewish Leadership” and “From Sanctuary to Boardroom: A Jewish Approach to Leadership.” He can be reached at