Goodwill refocuses on mission as more high-paid executives depart, other sweeping changes occur

Goodwill Omaha is undergoing sweeping changes, including the exits of more top executives, a top-to-bottom evaluation of its pay structure and a commitment to put more thrift store profits into its mission of serving the disabled and others with barriers to employment.

Additional steps the embattled charity now plans also include getting a third-party assessment of its operations and governance, undergoing a review of its ethics through another outside organization, and ending the controversial practice of paying some disabled workers less than the minimum wage.

Goodwill’s board disclosed the changes as part of its “initial plan to move forward” in the wake of a World-Herald investigation that laid open the charity’s corporate-style executive pay, scant thrift store profits devoted to jobs programs and an internal culture that put maximizing profits ahead of the clients the tax-exempt charity is set up to serve.

“Through the Omaha World-Herald articles, we have learned some lessons, and discussions on the topics highlighted in the articles have been taking place over the last few weeks,” read a statement from the board of trustees and Pauli Bishop, the charity’s interim CEO. “We are committed to making changes and moving forward.”

The charity also confirmed it has made additional personnel changes beyond the resignation of CEO Frank McGree, who stepped down two weeks ago in the immediate wake of The World-Herald investigation. While not disclosing specifics, Goodwill said Friday two jobs were eliminated while another longtime employee announced his retirement.

Sources said the new retiree is the charity’s No. 2 executive, longtime Executive Vice President Andy Bradley. The sources also said those losing jobs included Vice President Todd Milbrandt, who The World-Herald revealed had oversight of a Goodwill program in which Chinese-made hair rollers were repackaged in bags labeled “Made in America.” Milbrandt’s name was removed from the charity’s website Friday.

The changes will likely be viewed favorably by many of those upset by The World-Herald’s revelations, though it still might take time for the charity to fully win back public trust and confidence. Goodwill officials acknowledged last week that material donations to its thrift stores have taken a big hit – down 26 percent so far this month compared with a year ago.

A trustee for the Dr. C.C. and Mabel L. Criss Memorial Foundation, a major Goodwill financial donor that had announced a suspension of future giving, said he was glad to hear of Goodwill’s plans for change.

“But they need to restore trust not by what they say but what they do,” said Andy Davis, the trustee. “Goodwill needs to demonstrate by their actions that fewer dollars are spent on executive pay and more is being spent on its important job-training programs. They have a lot of work to do.”

In spite of Goodwill’s slogan that shopping at or donating to its thrift stores helps needy job seekers, The World-Herald’s investigation found that at the charity’s Omaha affiliate, such efforts have been more likely to contribute to lofty executive salaries.

McGree received a corporate-style pay package exceeding $400,000 annually – more than double the average for CEOs at other Omaha social service nonprofits. A $519,000 retention bonus in 2014 brought his pay that year close to $1 million.

In all, 14 executives and managers at the charity last year were paid $100,000 or more, including McGree’s daughter. For its size, no large Goodwill affiliate in the country had more employees paid in six figures, the newspaper found.

The paper also revealed that out of $4 million in profits generated by Goodwill’s thrift stores last year, only $557,000 found its way into its job programs. The rest of the thrift profits were gobbled up by the agency’s overhead expenses, including much of its executive pay.

The charity’s executive pay also stood in sharp contrast to that of its rank-and-file workers, relatively low-paid social workers and store managers and retail employees making just over minimum wage. The charity has additionally employed more than 100 disabled workers at less than minimum wage – legal under a controversial Depression-era federal law.

Former employees told the paper that Goodwill’s mission in recent years has taken a back seat to executive pay, with job trainers who worked with disabled students frustrated by the charity’s reluctance to hire graduates to work in the profit-driven thrift stores.

In the wake of the series, numerous major Goodwill financial donors and many who regularly donate to the charity’s thrift stores vowed to pull future support.

McGree resigned within days, and the charity’s board vowed other changes. The latest moves followed a meeting last week of the nonprofit’s board.

The charity now will be shedding two more big salaries with the retirement of Bradley ($237,000 in total compensation last year) and the elimination of Milbrandt’s job ($172,000). In fact, with their departures, along with McGree’s retirement and the exit of the former chief operating officer earlier this year, four of Goodwill’s five highest-paid employees will have left this year. Their combined total compensation in 2015: almost $1.1 million.

Going forward, Goodwill plans to obtain an outside assessment of its executive pay practices. It also set a goal of conducting a top-to-bottom compensation audit for the entire organization.

Central to the charity’s other plans is a refocusing on its mission. Goodwill’s statement said retail thrift store profits “will be maximized to enhance mission programming throughout our community.”

Payment of subminimum wages for severely disabled employees will end by next year, the charity said. Goodwill said the move had already been in the works, and the number of employees making less than minimum wage had recently dropped from 110 to 32. The charity said it is moving deliberately on the change to make sure the added income does not cause some disabled adults to lose important federal or state benefits.

Bishop, the Goodwill chief financial officer who has stepped in as interim CEO, said the charity has not yet determined who will conduct the third-party review of the charity. Goodwill has reached out to the Nonprofit Association of the Midlands in hopes of identifying a candidate for that role.

The charity’s internal culture will be another focus. The charity said it will form an employee council to gather input from throughout the organization. Additionally, it plans an internal survey of its culture and ethics through the Business Ethics Alliance, a nonprofit in Omaha that promotes and offers programs on ethical business practices.

After refusing for more than two months to discuss its executive pay with The World-Herald, Goodwill now is pledging to improve its transparency both internally and externally.

Goodwill said it will retool the metrics that measure its community impact and report those results on a quarterly basis. It will also begin posting its federal tax filing – where it’s required to disclose its finances and executive compensation – on its website. And it said it will improve internal communications, including encouraging interaction between rank-and-file employees and leadership.

Erin Swanson Russell, a Goodwill representative, said the board is still formulating its plans for finding a permanent successor to McGree.

Anne Hindery, CEO of the Nonprofit Association of the Midlands, confirmed that Bishop had reached out to her organization. Hindery said she shared with Goodwill its annual survey of comparable pay at nonprofits, its best practices guidelines for boards, and offered additional training for its board members. Hindery is also working to help identify someone to do the third-party review.

Hindery said the plans Goodwill has announced are a good first step. But she said the charity now needs to turn those plans into real organizational change.

“This is an opportunity – as painful as it may be – to say ‘What do we need to fix?’ ” Hindery said. “I think they are receptive to learning about the right things, and I think that’s great. What they ultimately do at the end of the day, time will tell.”

Kim Daeges, whose 23-year-old son, Garrett, is disabled, said her “hair was on fire” when she read last month how Goodwill’s executive pay was taking away from funding for the needy. She applauded the staff shake-up and the plans for change.

“It’s great news,” she said. “I’m hoping they will now put that million dollars into funding for the people they’re supposed to help.”

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