This report will examine executive compensation at JDRF and the ADA.
This is the 9th annual review of T1D non-profit executive compensation. The main takeaway is the same as all prior years: neither JDRF nor the ADA directly ties executive compensation to performance towards a T1D cure. The majority of compensation to senior executives is fixed, guaranteed, and not related to any performance metric.
- The majority of top-executive compensation at the ADA and JDRF is fixed and not tied to performance. See Appendix A.
- 80% of JDRF top-executive compensation is guaranteed
- 83% of the ADA top-executive compensation is guaranteed
- Executive compensation is not linked in any direct way to:
- Progress toward a T1D cure
- Progress toward achieving donor’s top priorities
- Fulfilling the promises made during fundraising campaigns (funding cure research)
- Donors do not have a way to influence executive compensation.
Executive Compensation Not Tied to Results
Top executives at the highest performing for-profit companies often have the majority of their annual compensation directly related to performance. The better the company does in achieving its objectives, the more the executives are compensated. Such compensation provides a powerful personal incentive to drive the company towards results that also benefit stakeholders and shareholders.
This model generally does not carry over to non-profit organizations, which we believe is a missed opportunity to drive urgency, focus, and overall performance toward the mission. Yet, there are a few non-profits who have embraced this model of tying executive compensation to performance. One of the best examples is the American Heart Association (‘AHA’) where up to 50% of the CEO’s income is based on performance. From the AHA 990:
“Select members of the senior executive team participate in a board-approved long-term incentive plan designed to ensure a unified, long term focus and the continued dedication to achieve key priorities that will help the organization grow and serve the community in support of the mission. All goals are established at the organization-wide level and include revenue and mission goal.”
The major diabetes non-profit organizations do not follow the AHA model. None of the top T1D non-profit executives have a large financial incentive to deliver the organizations to make rapid progress to a T1D cure.
High Pay Means High Accountability
The high compensation level for diabetes non-profit executives places them in the top 1 percent of all earners in the United States. This level of compensation is often necessary to attract top leadership talent. However, with high pay also comes great responsibility and expectation to deliver extraordinary results. Ensuring that a majority of the high-compensation is tied directly to mission and cure progress helps ensure that executives are driving the non-profits to deliver results that are most important to their community.
Again, this type of compensation does not exist today within the major diabetes non-profit organizations.
How a Say on Pay Could Help Donors Achieve a Practical Cure
JDRF and ADA compensation decisions are not made transparent to donors. A committee within the Board of Directors establishes compensation strategy and provides annual approval for any performance-based pay and the average donor is given no input or transparency into the decision.
The JDCA recommends adopting a “say on pay” model to develop the relationship between executive compensation and donor interest. Corporations with “say on pay” provisions allow shareholders to vote on specific aspects of executive compensation, such as pay structure, base pay, and bonus amounts. “Say on pay” would make T1D nonprofit executives accountable to T1D donors in the way for-profit executives are accountable to shareholders.
Appendix A: Percentage of Top Executive Compensation Based on Performance