Compensation Approaches When Long-Serving Chief Executives Transition Out

Posted by on Apr 2, 2019 in Articles, Blog | 0 comments

Compensation Approaches When Long-Serving Chief Executives Transition Out

I recently assisted a small-staffed, private foundation in a planned leadership transition of their chief executive who had a tenure of 20-plus years. To get a sense of how other foundations approached creative retirement/transition packages for long-serving foundation chief executives, I posted a list-serv inquiry with Exponent Philanthropy, 21/64 and Philanthropy Ohio.

With the permission of the foundation, I’m sharing some of what we learned. I have edited the comments to ensure the privacy of the respondents and organizations.


We have a local private foundation work with us as a community foundation to establish a named endowed fund in honor of their former staff and board alumni to benefit the organizations or initiatives that the person identified as the most meaningful to them. Everyone has really appreciated this dedication to honor their community impact legacy and the private foundation enjoys supporting the local community foundation.

Director of Donor Services,
Community Foundation


I was involved with a private foundation whose executive director left after many years. While he requested compensation upon his exit, their attorneys cautioned the board on giving too significant an amount of compensation after the executive had left the organization, because it might appear to be “excessive compensation” for a nonprofit. Instead, they made a grant to a nonprofit where the outgoing executive director became a fellow, and worked part-time for a couple of years.

Executive Director,
Philanthropic Support Organization


I’ve heard of a grantor family that donated to a Charitable Remainder Unitrust with the income payments to the retired Director for life; with remainder to qualified public charity(ies).

Vice President,
Financial Services Corporation


I’m happy to be able to weigh in on this one. When our (previous) Executive Director retired, the Board elected to honor his 25 years of service in the following ways:

  • We retained him as a salaried employee with the title of Executive Consultant for six months. During this period, we paid him the same salary, but without any fringe benefits.
  • Our board also established a grant award fund in his name. The award of $50,000 will be given to one organization annually that best exemplifies excellence in our strategic focus area.

Executive Director,
Private Foundation


I took over as the CEO of a small foundation back in mid-2017 and I assumed the role because the exiting CEO of 20 years was retiring. There was a one-month overlap between us; his institutional knowledge being passed to me over 30 days allowed for him to be needed a bit less after his exit. My board also supported on-going support from the prior executive as needed for up to one year (that was in my court).

We contracted with him for two additional items afterwards. There were a series of client/donor/investor meetings that he flew to so warm introductions could be made and so he also could serve as my guide (we cover a large geography with different groups of influence). We paid all of his expenses and a consulting fee based on his hours of work. In total it probably worked out to be about $1,000/day + expenses. He also completed a report for our constituents that was an annual report that he worked with me on but largely did the work for. That was all we needed in our space but I still keep in touch with the prior CEO and we share exchanges almost monthly just touching base informally. He was very humble in the transition and wants to see me be successful.

President,
Foundation


A foundation that was in the process of sunsetting provided its executive director a major annual investment in the ED’s retirement fund, covered the cost of the ED’s and spouse’s COBRA extension, and created a Donor-Advised Fund at the ED’s local community foundation which allocated 60% pay for a year with limited duties.

Former Foundation Executive Director

Menu
Menu