Another irresponsible executive

Hard to believe in Boston:

Amid struggles, arts center chief got $1.2m bonus
By Geoff Edgers, Globe Staff July 31, 2007
Not long before the Citi Performing Arts Center decided to make drastic cuts to its popular summer production of Shakespeare on the Boston Common, its board agreed to pay president and CEO Josiah Spaulding Jr., a $1.265 million bonus.
That payment came on top of Spaulding's annual compensation of $409,000, plus $23,135 in benefits. Spaulding's salary alone already makes him one of the highest-paid leaders of a performing arts center in the country.
"Spaulding's salary seems extraordinarily high compared to the activity level at the [Center]," said Richard Johnson, former chief financial officer of Boston Ballet and current CFO of Washington National Opera. "It seems to be entirely out of scale with what that organization does."
Spaulding has presided over five straight years of budget deficits, cuts to programming, and a dramatic drop in performances at the Wang and Shubert theaters, which the Citi Center operates. The decision to slash the Shakespeare production that ended on Sunday -- the budget was sliced in half, to $481,027, and the free production's run from three weeks to one -- has brought renewed criticism of Spaulding and the Citi Center.
The Globe examined Citi Center documents recently filed with the Internal Revenue Service and provided by the center, and conducted interviews about the organization's practices. Along with details about Spaulding's compensation, the examination found that the organization has installed Spaulding's wife as its website manager, and employed companies either owned by or managed by some of the group's trustees.
GLOBE GRAPHIC: Leadership pay at leading arts organizations
Citi officials sat down for a four-plus hour interview on July 10, but in recent weeks have declined to answer questions about the operation of the center.
In the interview, Spaulding confirmed that he had gotten a bonus from the Citi board. But he pointed out that, because of wider cutbacks, he volunteered to take a $100,000 pay cut. His salary declined from $504,000 in the fiscal year that ended May 31, 2005, to $409,000 for the fiscal year that ended in 2006.
"I wanted to contribute what I could," said Spaulding.
"It was viewed as a very responsible thing for Joe to do that," said board chairman John William Poduska Sr.
There are other performing arts center leaders who are paid more than Spaulding. But they preside over centers with operations, in some cases, nearly 20 times larger than that of the Citi Center. According to the most recent records on file, Michael Kaiser of the John F. Kennedy Center for the Performing Arts in Washington, D.C., earns $1,029,691 a year. The Kennedy Center has a $141 million budget, meaning Kaiser's salary is 0.7 percent of the organization's budget.
The Citi Center's budget for fiscal year 2006 was $6.3 million. That makes Spaulding's salary 6.5 percent of the organization's budget. Spaulding is also paid a higher percentage of his organization's operating budget than leaders of the premiere performing arts centers in Los Angeles, New York, Minneapolis, Chicago, New Jersey, and Cleveland.
The son of a former Republican State Committee chairman who founded the Spaulding Rehabilitation Hospital, Josiah Spaulding Jr. was hired by the Wang Center in 1987 to serve as general manager. A year later, he was named president. He is credited with reviving the once run-down hall, and making it one of Boston's most successful arts centers during the 1990s.
Spaulding's bonus was actually set in motion in 2001, when the then-Wang Center's trustees created what they called a "retention program . . . to maintain continuity of key positions within the organization," according to documents filed with the IRS. At the time, the center was coming off several years of surpluses.
In 2005, after announcing they had extended Spaulding's contract until 2008, center trustees said that Spaulding would be eligible on May 31, 2006, for a $1 million bonus for contract completion. In fact, the total was $1.265 million, the organization's government filing stated. The center declined to say when the payment was made, and where it came from the budget.
The document did not name Spaulding as the beneficiary of the "retention program." But Lynne Kortenhaus, the trustee serving as spokesperson, confirmed the bonus in a July 12 e-mail. Kortenhaus declined to say whether any other center employees were made part of the retention program.
In a phone interview on July 18, board chairman Poduska said the bonus was created to keep Spaulding at the center. "Was it justified or not? Boy, I'll tell you it was," he said. "Joe was being courted by everyone under the sun. . . . He stayed and did a heck of a job."
Poduska said he did not know specifically what other organizations had offered positions to Spaulding.
In the latest fiscal year for which figures are available, which ended May 31, 2006, the Citi Center had a $2.7 million deficit, according to figures provided by chief financial officer Peter D. Fifield.
For fiscal 2007, Fifield projects, the center will have a narrower, $354,716 deficit, largely because of severe programming cuts and a $1.3 million infusion from New York-based Citigroup, which purchased naming rights for the institution last year.
The former Wang Center has struggled in recent years due to increased competition, which has caused difficulty in finding profitable touring shows to fill its theaters. To reduce potential losses, the center cut the number of shows it presents. Over the last year, the Wang Theatre, Citi Center's main venue, held 131 performances, a Globe examination of performance records supplied by the center has found. The theater has been open for business only a third of available nights. This is down from the 96 percent rate that Spaulding touted throughout the 1990s.
Citi Center's struggles make Spaulding's bonus questionable, said Marcus S. Owens, the former head of the IRS's exempt organizations division who is now practicing law with the Washington, D.C., office of Caplin & Drysdale.
"Any compensation at these levels is one that would undoubtedly raise eyebrows," said Owens. "Completing one's contract doesn't sound like extraordinary performance. It sounds like expected performance. Bonuses typically award extraordinary performance."
Trent Stamp, president of the New Jersey-based nonprofit watchdog group Charity Navigator, criticized not just the bonus but the way it was reported.
"At best, they're trying to be cute," he said. "At worst, they're being evasive. If this is a bonus for one particular person, why not say that? And the reason they won't say that is because people will be outraged."
Charity experts also raised questions about the hiring of Spaulding's wife, Joyce Spinney, for a key position.
Spinney is Citi Center's website manager, the center confirmed July 12. The center declined to provide her salary, nor would it discuss the process that led to her hiring. The organization is not required to list her status on government filings, but charity experts say the center should do so in the spirit of transparency, and to remove the perception that Spinney's relationship with Spaulding led to her position.
Spinney was director of theater services at the Wang when she and Spaulding were married in 1998. The couple have homes in Charlestown and Hobe Sound, Fla., and a 42-acre property in Vinalhaven, Maine, according to property records.
Center leaders also declined to discuss the hiring of Kortenhaus Communications, which is operated by trustee Kortenhaus. The center disclosed the hiring of Kortenhaus in its most recent IRS filing.
While neither hiring is illegal, charity experts say that a nonprofit board should explain how the insider hired provides a special service, or special price, to avoid the appearance that the person or firm received an unfair advantage.
"Certainly, hiring a relative or a trustee is an area where there needs to be great care taken to make sure it's the right thing for the charity," said Richard Allen, a Boston attorney who was chief of the state attorney general's Division of Public Charities from 1987 through 1999.
The Citi Center paid Kortenhaus Communications $43,109 for public-relations work for the fiscal year that ended in May 2006, according to the same IRS filings. In addition, the center paid DLA Piper $99,441 for legal services during the same fiscal year. Elliot Surkin, a managing partner at the firm, is a Citi Center trustee.
Surkin, Kortenhaus, and the center's leaders declined to answer questions about payments to the firms, though Kortenhaus remains the public-relations person.
Following the July 10 interview, Kortenhaus asked the Globe to submit any further questions via e-mail.
After receiving a list of 35 questions on July 25, she and the other Citi officials declined to answer any of them.
Instead, Poduska sent a statement that read, in part:
"As is common practice in both profit and nonprofit organizations, we do not comment on internal operations, personnel issues or proprietary information on employees, outside vendors or consultants beyond what is required by law. . . . We have complete confidence and fully support the institution's senior management team and the leadership of its President & CEO, Josiah Spaulding, Jr."
Geoff Edgers can be reached at gedgers@globe.com. For more on the arts, visit boston.com/ae/ theater_arts/exhibitionist.

Now read about other executives...