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The Second Mile and Jerry Sandusky: Is Compensation Relevant?

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I am a Penn State grad.  Like all people associated worldwide with that institution, I am shocked, saddened, and bewildered by the hideous acts allegedly committed by Jerry Sandusky, a former Penn State football defensive coordinator.  The stain of this case is indelible, and we will be treated to a withering barrage of reports and charges, some of which will be fair and accurate, some unfair and inaccurate, and the rest falling somewhere in between.

Here’s one example of the last.  I enjoy the take-no-prisoners attitude of Deadspin, and I visit the site at least several times a week.  Last week it informed its readers of the pay Jerry Sandusky received from the charity he formed, The Second Mile, even after admitting he showered with a boy in 1998.  Deadspin reported that after he retired from Penn State but before the allegations surfaced, from 2001 through 2008, Sandusky received $57,000 annually from The Second Mile.  He was paid this for serving as a “consultant” to the organization from 2001 through 2008, and Deadspin stated that the total he received was $456,000.  A review of The Second Mile’s information returns (IRS Forms 990) from 1998 through 2010 shows that Deadspin gets the numbers right (as does The Wall Street Journal).  But then Deadspin lobs this at the reader:

“Even without the allegations that Sandusky used the charity to find victims, this kind of gravy-ladling should make everyone sick. Think of it this way: In eight years, Jerry Sandusky made more money showing up at golf courses and steak dinners than most Americans do working every day.”

This is really off the point of the criminal allegations.  We have to ask, how does Deadspin know what The Second Mile paid for?  More to the point, what does Deadspin know that The Second Mile paid for?  Golf courses and steak dinners only?  I doubt it, because such an arrangement is not unusual.  For example, our firm has prepared compensation plans for retired leaders of companies and nonprofits who have returned post-retirement to their organizations to serve in a less demanding, but valuable, consulting role.  And The Second Mile seems to have been canny about retaining the services of its now disgraced founder: it got eight years of service for a flat yearly rate with no increases.  To see what this means in practice, observe the fact that $57,000 in 2001 dollars equates to $69,335 in 2008 dollars (at a total inflationary change of 21.6%) when put into a simple inflation calculator.  In other words, whatever else its failings, The Second Mile seems to have saved money on Sandusky’s services.  This is not meant to trivialize the gravity of the allegations against him.

Deadspin seems to imply that, based upon what we now believe, Jerry Sandusky deserved no pay from The Second Mile.  That’s understandable.  And it continues in this vein with three others: former President and CEO Jack Raykovitz; his wife, Executive Vice President Katherine Genovese; and Executive Director Henry R. Lesch.  Here, Deadspin’s focus again is compensation, with an obsessive view of total compensation over a span of years: $1,300,145 for Raykovitz, $912,563 for Genovese, and $793,667 for Lesch since 1998.  All of this without regard to the three individuals’ education, experience, skills, responsibilities, and results in position.  On this same basis, one might calculate a total 12-year compensation for a sports writer of, say, $1,200,000 and conclude that such a sum is per se improper.

Deadspin seems to have sprung a common trap: when a corporate or nonprofit executive or officer has fallen from grace, his or her compensation is almost reflexively claimed to be undeserved or excessive, if not the cause of events.  This is an after-the-fact view, providing no perspective on events as they occurred.  With the case of Jerry Sandusky, I suggest that the matter is not one of compensation but rather of governance.  Governance” relates to the nature and extent of accountability of individuals in an organization.  The operative issue here is one of the stewardship of the goals and principles, including ethical standards, of a charitable organization such as this by its board and officers.  If we switch our gaze to governance, we can ask what those who were in a position to be aware of Jerry Sandusky’s actions knew as those acts were unfolding.  This is a fair question if you bear in mind that The Second Mile has had the same chairman since 1994.  And Raykovitz is a licensed psychologist who served The Second Mile for 28 years.  Their tenure, like that of Genovese (since 1984) and Lesch (since 1988), overlaps the period of the grand jury allegations.  Consequently, given their duties and their long-term association with Jerry Sandusky, it’s fair to ask what the staff and board of The Second Mile knew or should have known about Sandusky’s behavior and what actions, if any, they may have undertaken in response.

The takeaway?  Maybe money isn’t the root of all evil.  Maybe evil can be its own objective.  Were mere money at the core, maybe this wouldn’t hurt us so much.  The absence of a money objective may make these (yes, still alleged) grotesque events all the harder to comprehend and bear to all of those with Penn State in their hearts.

Paul Creasy