Yesterday’s Indianapolis Star contains another report on the controversial executive compensation package of Citizens Energy which operates Citizens Water in Indianapolis.
In it, Citizens board president Jim McClelland was quoted to the effect that management’s remuneration is indeed “competitive”. However, as the Advance Indiana blog reported (see blog post below) on Wednesday, McClelland himself makes more that a half- million per year managing a non-profit— Goodwill Industries.
The story also quoted Kerwin Olson, Executive Director of the Citizens Action Coalition of Indiana, who provided the following pertinent observations:
“They use the “trust”: to attempt to differential themselves from investor-owned utilities, then use the compensation levels of investor-owned utility executives to establish pay levels for their own people. You can’t have it both ways. The mission of the trust is decidedly different from the mission of a private utility, so perhaps it’s time for the legislature to take another look at whether or not this alleged “public charitable trust” remains in the best interest of the residents of Marion County.”
Water utilities love to expand water service to new outlying areas because it opens up new permanent revenue streams and perhaps also an additional avenue for increasing executive compensation. Citizens Water has often flatly asserted that Indianapolis and central Indiana will continue to grow– and thus require more and more water. The unlimited growth presumption of Citizens Water for central Indiana is a rebuttable one. Do we really want to encourage a sprawling suburban and exurban metropolis covering eight or nine counties? Citizens Water recently acquired the Fortville waterworks following several other recent purchases of exurban systems. Is Citizens now eyeing the Anderson municipal waterworks for acquisition? Are they being encouraged to do so by the pro-reservoir commercial interests? We shall see.
Granted, the executive compensation issue is more of a concern to Indianapolis residents who must bear the cost than it might be for Anderson area folks who would be impacted in various ways by a reservoir, but who, under their current municipal ownership, presumably would not be required to foot the bill for the high personnel expenses of Citizens Water.
Wednesday, July 10, 2013
Citizens Energy Board Chairman Defends High Executive Pay, Earns More Than Half Million To Run Nonprofit
Citizens Energy’s board chairman, James McClelland, stepped forward today to defend the $3 million salary paid to the nonprofit utility’s CEO Carey Lykins, double what he earned the previous year, as well as the more than $250,000 earned in annual salaries by at least 16 other executives with the publicly-owned, nonprofit utility that promised reductions in future rate increases through savings but has instead dealt consumers double-digit rate hikes like we experienced under the City of Indianapolis’ incompetent management of the water and sewer utilities. The Star’s Tony Cook reports on McClelland’s statement:
“Appropriate compensation for our executives and all Citizens employees is a key factor in achieving our long-term objectives,” said McClelland, who is president of Goodwill Industries in Indiana. “The overriding goal of our compensation program is to offer salaries and benefits that are competitive with peer companies in the utility industry and private industry.”
McClelland said executive pay at Citizens is established with the aid of an independent study of what similarly situated executives make at other companies with revenues similar to Citizens.
“Currently, compensation for our executive group is just below the 50th percentile,” he said, “meaning about half of the executives in the market make more than Citizens executives and half make less.”
McClelland is not one to judge on the salaries to be paid to nonprofit executives. He serves as the President of Goodwill Industries of Central Indiana where he pulls down a salary and benefits well north of $500,000 annually according to Form 990s the nonprofit files with the IRS. He has seven vice presidents working under him at Goodwill Industries earning between $150,000 and $250,000 a year. Salaries and administrative costs consume nearly $10 million of the nonprofit’s annual revenues. No wonder Carey Lykins handpicked McClelland to serve on Citizens’ board. These nonprofts are nothing but rackets for self-dealing people professing to work for the public good.
State Rep. Ed DeLaney is spot on in his observations to Cook. “It’s just not acceptable for them to get that kind of compensation,” said DeLaney. “I would hope that the board and the trustees were set up to use judgment, and that’s what I think has been missing here.” DeLaney stopped short of calling for legislative changes, suggesting that the IURC should do its job. “I’m not saying I wouldn’t do something about it, but I’m very pleased to see the IURC taking a careful look at it. That is their responsibility. I’m very glad they’re doing that, I’m impressed with their effort on this.”