The executive who heads the organization’s Los Angeles branch makes more than $400,000 a year. His San Diego counterpart brings in $206,000. The head of a smaller office in New York earns $175,000.
Salaries at a corporation? Guess again.
That’s the compensation for local presidents of the nonprofit Better Business Bureaus, which issue letter ratings to businesses that are supposed to reflect how fairly they treat consumers.
The organization’s national president earned $335,000 in 2008, according to the latest available documents from the Internal Revenue Service.
But that salary was eclipsed by William Mitchell, president of the Better Business Bureau of the Southland, which includes Los Angeles. He made $409,490 that year, according to IRS documents.
“I can’t remember any case where somebody running a local chapter is earning more than the person who is running the national organization,” said Trent Stamp, former head of the watchdog organization Charity Navigator and now executive director of the Beverly Hills-based Eisner Foundation.
The Better Business Bureaus have come under a spotlight after disclosures that the organization gave better ratings to businesses that were paid members — and, in some cases, awarded A-grade ratings to phony companies that paid up.
Small businesses have long complained that many chapters of the Better Business Bureau used telemarketers armed with high-pressure tactics to get them to sign up for memberships that could cost $400 or more.
In the wake of fresh news reports on its practices last week, Steve Cox, president of the national Council of Better Business Bureaus, said the organization would no longer boost ratings just on a basis of paid membership.
He also said the BBB would investigate activities at the Southland branch, which initiated the controversial grading system.
The salaries paid to the local chapter executives are set by local boards of directors, which have discretion to pay any amount that they feel is appropriate, said Alison Southwick, spokeswoman for the national office.
The national office does not set a specific formula or approach, she said.
Mitchell and other executives at the Southland branch did not return calls for comment on the salaries.
The salaries took a significant bite out of the budgets of the chapters, which were supported by members’ dues. The Southland chapter spent $5 million of its $7-million budget on compensation, according to the tax documents. The national office spent $10 million of its $16-million budget on employees.
Daniel Borochoff, president of the American Institute of Philanthropy, said the fact that Mitchell was paid vastly more than heads of other chapters raised a red flag. Mitchell got nearly twice as much as the president of the Chicago BBB, for example, who was paid about $206,000, according to the tax documents. The head of the New York chapter made about $170,000.
“Why is the L.A. person paid so much more than the other ones?” Borochoff asked. “Is he getting paid based on what kind of sales he can bring in?”
Southwick said the salary earned by Cox, national president of the BBB, was reduced to $300,000 when he took over the job last year, and was in line with the earnings of chief executives at nonprofit industry associations.
Mitchell also made far more than others in the Southland office. The senior vice president of the chapter, for example, got $97,000, according to tax documents.
“You fall off a cliff after you look at that salary,” said Ken Berger, current head of Charity Navigator, concerning Mitchell’s compensation.
Claire Rosenzweig, president of the Better Business Bureau of Metropolitan New York, was paid about $168,000 in 2008, about 59% less than Mitchell. She declined to comment on Mitchell’s salary, but applauded the investigation into the accreditation of the fake Los Angeles businesses.
“Accreditations must be earned,” Rosenzweig said. “If some people have made mistakes, I’m glad that it’s being investigated.”