1 1 UNITED STATES of AMERICA 2 3 COMMITTEE for PURCHASE from PEOPLE 4 WHO ARE BLIND or SEVERELY DISABLED 5 6 PUBLIC HEARING 7 Hearing Subject: The Committee's consideration of 8 revisions to agency regulations for the 9 qualifications required of both central nonprofit 10 agencies and nonprofit agencies to participate in the 11 JWOD Program and the guidelines under which executive 12 compensation will be considered as either influencing 13 or not influencing a fair market price. 14 15 Held at: 16 Phillip Burton Federal Bld. 17 Second Floor 18 California and Nevada Rooms 19 450 Golden Gate Avenue 20 San Francisco, CA 94102 21 22 Thursday, January 26, 2006 2 1 The above-entitled matter came on pursuant 2 to notice at 10:04 o'clock a.m. 3 Areas for which the Committee received input: 4 5 1, alternative approaches to determine that central 6 nonprofit and individual nonprofit agencies are 7 initially qualified to participate in the Program, 8 and then qualified to continue participating; 9 2, alternative approaches and mechanisms to assess 10 that the fair market price set by the Committee and 11 paid by federal departments and agencies is not 12 burdened inappropriately by excessive executive 13 compensation costs. 14 15 Committee Members Present: 16 James Omvig, Private Citizen 17 Andrew Houghton, Private Citizen 18 Steve Schwalb, Chairperson 19 Roy Grizzard, Department of Labor 20 Robert Kelly, Private Citizen 21 -- continued -- 22 3 1 APPEARANCES CONTINUED: 2 Committee Staff Present: 3 Patrick Rowe, Deputy Executive Director 4 Angela M. Phifer, Executive Assistant 5 Kimberly Zeich, Moderator 6 7 Speakers: 8 William Mead, Job Options Inc. 9 Wayne McMillan, Bobby Dodd Institute 10 Doug Barr, Goodwill Southern California 11 Tom Miller, NISH Board of Directors 12 Rhea Nelson, New Leaf, Inc. 13 Don Calcote, ARC Diversified 14 Barbara Nurenberg, JVS-Detroit 15 John Murphy, Portland Habilitation Center 16 Dwight Whittaker, Development Workshop, 17 Inc. 18 Steve Patterson, National Association for 19 the Employment of People Who Are Blind, 20 Susquehanna Association for the Blind and 21 Visually Impaired 22 -- continued -- 4 1 APPEARANCES CONTINUED: 2 Speakers: 3 Kirk Adams, Seattle Lighthouse for the 4 Blind 5 Chad Allen, National Federation of the 6 Blind, California 7 Brian Bashin, National Federation of the 8 Blind 9 Professional Journalists Group 10 11 12 13 14 15 16 17 18 19 20 21 22 5 1 I N D E X 2 Page 3 4 Opening remarks and introductions: 6 5 6 Public Comment: 13 7 8 Concluding Remarks: 147 9 10 11 12 13 14 15 16 17 18 19 20 21 22 6 1 P R O C E E D I N G S 2 (10:04 a.m.) 3 MS. ZEICH: Good morning, everyone. Good 4 morning. I'm Kimberly Zeich, a member of the 5 Committee staff. And it is just after 10:00 a.m. so 6 we'd like to go ahead and begin the hearing. Thank 7 you very much for taking your seats. 8 This hearing has been convened by the 9 Committee for Purchase from People Who Are Blind or 10 Severely Disabled, which is the independent federal 11 agency that administers the Javits-Wagner-O'Day Act. 12 And this hearing relates to the Committee's 13 consideration of revisions to agency regulations for 14 the qualifications required of both central nonprofit 15 agencies and nonprofit agencies to participate in the 16 JWOD Program and the guidelines under which executive 17 compensation will be considered as either influencing 18 or not influencing a fair market price. 19 The Committee is represented today by 20 several presidentially-appointed Members whom I will 21 now introduce. 22 First of all, our Chairperson Mr. Steve 7 1 Schwalb, also representing the Department of Justice; 2 Mr. Andrew Houghton, on his right, is the 3 Committee Vice Chairperson and Private Citizen 4 Member; 5 Dr. Roy Grizzard, representing the 6 Department of Labor; 7 Mr. Robert Kelly, Private Citizen; and 8 also 9 Mr. James Omvig, Private Citizen. 10 I would also like to introduce the 11 Committee's Deputy Executive Director Patrick Rowe 12 here in the front to my left. 13 Mr. Schwalb will make a brief opening 14 statement, and then I will return to make a few 15 administrative announcements and to introduce each 16 speaker. 17 Mr. Schwalb. 18 CHAIRPERSON SCHWALB: Thank you, Kim. 19 We appreciate very much the interest 20 you've shown by being here today for the last of the 21 three Public Hearings we're going to have on these 22 important regulatory issues. 8 1 The Committee strongly believes that 2 accountability, stewardship, and value form the 3 foundation for maintaining and growing employment 4 opportunities for people who are blind or have other 5 severe disabilities under the JWOD Program. We have 6 a statutory responsibility to both determine the 7 suitability of products and services proposed for the 8 Federal Procurement List and to determine that the 9 price paid by the government for such items. 10 This responsibility includes determining 11 whether Central Nonprofit Agencies and other 12 individual nonprofit agencies are qualified to 13 participate in the Program, and whether their 14 delivery of products or services can be sustained at 15 fair market prices. 16 We take these responsibilities seriously 17 and as we do our authority to carry them out. At the 18 same time the Committee decided it was appropriate to 19 hold public hearings on these issues in order to 20 obtain a broad and diverse perspective on our planned 21 rulemaking. 22 Specifically the Committee is seeking 9 1 input on two broad areas. One, alternative 2 approaches to determine that central nonprofit and 3 individual nonprofit agencies are initially qualified 4 to participate in the Program, and then qualified to 5 continue participating. And, secondly, alternative 6 approaches and mechanisms to assess that the fair 7 market price set by the Committee and paid by federal 8 departments and agencies is not burdened 9 inappropriately by excessive executive compensation 10 costs. These are the broad topics that are addressed 11 by the questions that we published in the Federal 12 Register Notice. 13 So on behalf of the Committee I'd like to 14 assure you that it's our intention to give very 15 careful and thoughtful consideration to all of the 16 relevant factors and, in particular, to the input 17 that we receive from the many Program stakeholders. 18 In addition to the current opportunity to 19 provide testimony or to provide written statements 20 through the end of the month, the Committee will 21 continue to solicit public comments through the 22 Federal Register when making any specific regulatory 10 1 changes. 2 We look forward to your constructive 3 suggestions. And let me just add one editorial 4 comment before I turn it back to Kim. 5 We have, as we have had at the last two 6 meetings, we have reporters here to get an accurate 7 recording of the input. We would ask that you be 8 conscientious of that when you come to the podium, 9 make sure you're speaking so that the microphone will 10 pick up your voice. 11 If someone else accompanies you or someone 12 comes up that is not on the list, please spell your 13 name and introduce yourself so the recorders will 14 know who's speaking. And I've given the recorders 15 explicit instructions to not be hesitant if someone, 16 as I have a habit of doing, speaks to rapidly to keep 17 up with or doesn't article their words or uses lots 18 of acronyms that the reporters are not familiar with, 19 that they'll interrupt and ask you to clarify that. 20 So be patient with them and be cognizant of that when 21 you're speaking, if you will. 22 Kim. 11 1 MS. ZEICH: Thank you, Mr. Schwalb. 2 All of today's speakers did register with 3 the Committee staff in advance and their names are on 4 the handout available in the back of the room. We 5 have had a few minor changes. There will be a few 6 individuals who are listed that are not speaking 7 today, and I appreciate those who are here and 8 speaking for checking in with me. 9 I would like to ask if Doug Barr is in the 10 room. I've not checked in with him yet. So if he 11 does come in later, Dave, if you would perhaps let me 12 know. I'd appreciate that. 13 We do ask for each speaker if you would 14 please begin your testimony by identifying yourself 15 and your organization for the record. We also of 16 course ask for your cooperation in keeping your 17 remarks to the five minutes. And the Committee 18 Members may choose to ask you questions at the end of 19 your five minutes. That will not count into the time 20 for the next speaker. 21 For most of you who are near the front row 22 and can see me, I will be standing up when you have 12 1 about a minute left in order to let you know that 2 your time is short. Again, we do ask for your 3 cooperation. 4 Also if you are asked questions, if you 5 would please try to keep your responses as brief as 6 possible, we would certainly appreciate that. 7 Please note that testimony will only be 8 heard and comments will only be considered to the 9 extent that they address the questions in the Federal 10 Register Notice that was published by the Committee. 11 We do remind you that in addition to 12 today's oral testimony we are still accepting written 13 comments through January 31st. And please refer to 14 the Federal Register Notice if you need the contact 15 information to submit those comments. I do have a 16 copy of that with me today. 17 From an administrative-announcement 18 standpoint, at the discretion of our Chairperson Mr. 19 Schwalb we will take a ten-minute break at 20 approximately 11:30 if we still have several speakers 21 remaining. 22 Also I do ask everyone here in the room to 13 1 please turn off or mute your cellphones or pagers or 2 devices, as those can be rather distracting for our 3 speakers. 4 At this time with no further 5 administrative comments, I would like to go ahead and 6 invite William Mead to the podium. He will be our 7 first speaker. 8 MR. MEAD: Good morning. My name is Bill 9 Mead. I'm the CEO of Job Options, a CRP in San 10 Diego. 11 I share the Committee's concerns regarding 12 compensation and governance issues. The JWOD Program 13 has suffered from one-sided media attention, but the 14 issues that are being addressed are complex and will 15 not yield to simple solutions. 16 For example, executive compensation is 17 very complex. Salaries should reflect a number of 18 aspects of job performance, including an 19 organization's success, its complexity, staff 20 satisfaction, and the education requirements of the 21 job. Salaries must also reflect the market because 22 we exist in the market. 14 1 Board governance is similarly complex. 2 CRPs vary in size from under $100,000 in annual 3 revenues to over $100 million. Their boards and 4 their staff vary similarly in their skills and 5 resources. 6 The complexity of these issues suggest 7 that simple formulaic solutions will lead to 8 injustices and unintended consequences. 9 Governance must be evaluated by outcome, 10 not process. A board of three members who never 11 change but who provide quality oversight for a 12 nonprofit that consistently attends goals, treats 13 employees with respect, and is financially sound is 14 unquestionably superior to a board of 12 or more 15 members who regularly defer to the executive staff. 16 Simple inflexibly rules regarding size and 17 composition only treat superficial problems. 18 One of the unintended consequences of 19 having a large board is that large board like large 20 organizations everywhere dilute individual 21 responsibility. The power then devolves to a small 22 executive group either within the board or within the 15 1 organization, which is contrary to the intentions of 2 the board -- or to the intentions of your Committee. 3 Board turnover if it's frequent puts all 4 board members on a steep learning curve. And as a 5 result you have a less competent board. Power will 6 follow knowledge and a board that isn't knowledgeable 7 will always defer to the executive staff. 8 In terms of compensation I think too much 9 attention has been given to large salaries, but this 10 is natural because they make great headlines. But 11 the public's perceptions of salaries can be very 12 unrealistic. The $90,000 figure that the Committee 13 has identified as a threshold strikes me as quite 14 low. 15 I know several public school secondary 16 teachers who make six figure salaries. In Southern 17 California $90,000 a year will buy you a controller, 18 it will not buy you a CEO. 19 People with disabilities deserve competent 20 leadership. This is leadership committed to 21 providing good employment in supportive environments. 22 Those kinds of executives, those kind of leaders can 16 1 command good salaries. To limit salaries of CEOs 2 just penalizes an already disadvantaged population. 3 I must admit the impact of compensation on 4 fair market prices confuses me. If these are fair 5 market prices, aren't they fair and aren't they the 6 market? The procurement officers with whom we work 7 drive hard but fair bargains. If there are 8 procurement officers who would support a high salary 9 for me, I'd like their phone numbers. 10 In general I'd like to recommend to the 11 Committee to adopt a supportive-partnership approach 12 to these problems. Solutions should start with an 13 "L," of the causes. For example, do boards know 14 what's required of them? Do they have the resources 15 and expertise to meet those requirements? 16 Using this approach I'd like to suggest 17 that the board develop a portfolio of requirements 18 and resources that can be used by boards to meet 19 their requirements. The Committee should adopt 20 sanctions as a last resort. 21 I would recommend that the Committee 22 mandate training for boards. That training could be 17 1 provided by CNAs or organizations like BoardSource. 2 It should be provided in geographically diverse areas 3 and should be subsidized for small CRPs who could not 4 otherwise afford it. 5 I strongly urge the Committee to avoid 6 setting overly-rigid requirements for board size or 7 composition. 8 With regard to compensation I'm very 9 concerned that the board [sic] considers $90,000 to 10 be a high salary. I do believe the Committee should 11 accept evidence of rebuttable presumption of 12 reasonableness. 13 I know it's been suggested that CEO 14 salaries should be linked to the salary of the 15 lowest-paid staff member. This approach while 16 emotionally appealing would have dire and unintended 17 consequences. Our organization should be hiring 18 people with the lowest productivity because these are 19 the people who find it hardest to find employment 20 otherwise. Under such a plan a successful CRP would 21 have to pay the lowest salary. I doubt that's your 22 intention. 18 1 Finally, I'd like to suggest that the 2 Committee should work closely with the IRS, and CRPs 3 suspected of paying CEOs unreasonably high salaries 4 should be referred to the IRS. They have the 5 resources and the expertise to deal with this kind of 6 problem. 7 Thank you for giving me the opportunity to 8 testify this morning. 9 CHAIRPERSON SCHWALB: Thank you very much. 10 I'm going to ask the other Committee 11 Members if they have any questions in a minute, but 12 let me ask one question, and it's really a follow-on 13 from a question that was raised at the last hearings, 14 and I'm going to give everybody advanced -- I'm sorry 15 I didn't give you advanced notice, but everyone else 16 is given notice. 17 I'd like to have a little give-and-take on 18 a question regarding this issue about relationship of 19 pay between CEOs and the workers not so much whether 20 there should be a tie but the other question which 21 is: How people feel about really a philosophical 22 question as to whether or not there should be a 19 1 consideration by the Committee given to a policy that 2 all the workers should make at least minimum wage 3 irrespective of the legal application of the 4 Commensurate Wage Provisions of the Fair Labor 5 Standards Act and whether you have any thoughts on 6 it. 7 And, again, I'm sorry I didn't give you 8 advanced notice on that. 9 MR. MEAD: No, that's fine. I've given it 10 thought. 11 CHAIRPERSON SCHWALB: But for the rest of 12 the speakers I don't want you to have to interfere 13 with your prepared five-minute remarks, so that's why 14 I'm asking the question at the end. And ask you all 15 at the end of your remarks so you don't have to try 16 to incorporate it into your prepared remarks. 17 But if you want to give us any thoughts on 18 that, and then I'll turn it over to the other 19 Committee Members for any questions they might have. 20 MR. MEAD: Philosophically if I were 21 emperor I'd require that everybody receive at least 22 the minimum wage. Practically I think it undermines 20 1 our mission. We're supposed to be serving people who 2 could not be employed competitively. If you can earn 3 a minimum wage I think there's some doubt as to 4 whether or not you are unable to find competitive 5 employment. 6 I think we undermine our credibility with 7 public bodies if we don't employ people that have 8 very low productivity. And, quite frankly, it's not 9 practical to pay those individuals the federal 10 minimum wage. It would certainly make us 11 uncompetitive with the procurement officers with whom 12 we have to work. 13 CHAIRPERSON SCHWALB: Okay. Thank you. 14 Any other questions? Andy? 15 MR. HOUGHTON: Mr. Mead, were you 16 suggesting that the Committee should not put a cap, 17 any cap on the executive compensation? I have two 18 questions. 19 MR. MEAD: Actually I don't think you 20 should. And let me offer this. What would our 21 problems be with unemployment among people with 22 disabilities if we were hiring the Jack Welches from 21 1 GE, the Andrew Grove from Intel, the Warren Buffets 2 or the Bill Gates? I think if we paid those people 3 what we'd have to pay them and put them in this work, 4 our problems with unemployment with the disabled 5 would disappear very quickly. 6 So I think that the IRS can handle this. 7 I mean they have the rules. I think we should have 8 the process in place for rebuttable evidence, but I 9 don't think hard limits serve any purpose. 10 MR. HOUGHTON: Thank you. Do you think -- 11 with regard to the wages of individuals, direct-labor 12 hour wages, do you feel, do you think that if -- I 13 guess what I heard you say is that the revenues from 14 these, generated from the JWOD Programs, if there are 15 additional revenues and if the agency is able to 16 afford them, you believe that that money should not 17 go to the individuals with disabilities working in 18 terms of wages or extra benefits? 19 And so you basically said we shouldn't pay 20 them any more hourly wage or because they're low 21 productivity, but you think just because their lower 22 productivity levels basically mitigates the necessity 22 1 or the responsibility afforded under this Act to pay 2 those individuals more money? 3 MR. MEAD: If you're suggesting that an 4 agency may have other sources of funds besides JWOD 5 revenues, that should those revenues be used to 6 support -- 7 MR. HOUGHTON: We're talking specifically 8 JWOD generated revenues. 9 MR. MEAD: Just JWOD. I mean I support 10 the notion and in fact my agency doesn't pay beneath 11 the federal minimum wage to any of our employees 12 because we are in the service business and we simply 13 can't employ very low functioning or low productivity 14 individuals. It just wouldn't work. But I know a 15 lot of agencies that do, and they should. And I 16 don't know how you can have a fair market price 17 support the wage of an individual that's low 18 productivity if they're being paid as if they were 19 high productivity. I just don't understand how that 20 would work financially. 21 Now if an agency has other resources and 22 chooses to spend them that way, that would be fine. 23 1 But that would be the responsibility of that board of 2 that agency to make that decision. 3 I don't have any argument with just the 4 notion of it. I just don't think it's economically 5 practical. 6 MR. OMVIG: Kind of a follow-on question 7 to what you've been asked. You talked of 8 organizational success as a concept to look at in 9 Programs, and compensation would be driven by 10 organizational success. 11 There would be those in the disability 12 community who say one factor in looking at 13 organizational success is what has happened to the 14 disabled workers, are they being paid fair minimum 15 wages or actually living wages in their communities? 16 Do they receive medical benefits? Do they receive 17 retirement benefits? Do they, in essence, receive 18 the same kinds of benefits that executives in the 19 Program run? 20 And so some disabled people would say 21 that's got to be a factor in looking at 22 organizational success, and I wondered if you'd have 24 1 a view on that. 2 MR. MEAD: Well, like I say, I certainly 3 support that. We provide those things to our 4 employees. But I know that there are agencies unlike 5 mine that work with people who have very, very 6 limited abilities to work and to fulfill any of the 7 requirements of daily life. 8 And I don't know how you can support those 9 individuals at a minimum wage within the JWOD 10 Program. I just don't understand how that would 11 work. You could, I suppose, or I don't know if you 12 can, but assume you could force the procurement 13 officers to pay a higher price on those contracts and 14 support those wages. And if that's your decision, of 15 course I would go along with it, but it seems 16 contrary to the notion of us providing services and 17 commodities at a fair market price. So I don't 18 understand how we can resolve that conflict. 19 Philosophically I agree with you. 20 MR. OMVIG: Okay. And I'm probably going 21 to ask several people today, and I suppose other 22 Members on the Committee will too, we're trying to 25 1 get some handle on what executives actually are 2 receiving not only in salary but in terms of total 3 benefits and deferred compensation and bonuses and 4 the whole package, everything. 5 What is your total compensation? 6 MR. MEAD: This year it would have been -- 7 in the past year, $168,000. I receive no other 8 benefits. I receive no vacation, no retirement 9 benefits, no healthcare. 10 MR. OMVIG: Well, now that last part is 11 just surprising. Anyway, I appreciate that. 12 MR. MEAD: Well, I'm on Medicare, so. 13 MR. OMVIG: Oh, I see, okay. 14 MR. MEAD: And mine is one of the larger 15 agencies among the CRP community. 16 CHAIRPERSON SCHWALB: Thank you very much. 17 MR. MEAD: Thank you again for giving me 18 this opportunity. 19 MS. ZEICH: I'd like to ask the next 20 speaker to please come to the podium, Mr. Wayne 21 McMillan. 22 Also for those who joined us a few minutes 26 1 late, we are asking each speaker on the list to 2 please identify yourself as well as your 3 organization. And if anyone missed the 4 administrative announcements, we do ask that you 5 please turn off all cellphones or pages or mute them. 6 Thank you. 7 MR. MCMILLAN: Good morning. My name is 8 Wayne McMillan. I'm from Atlanta, Georgia and I 9 appreciate the opportunity to stand before you and 10 provide some remarks with respect to your rulemaking. 11 I submitted my testimony earlier and I 12 don't intend to go through all of it. I would just 13 like to go over a few points to recap. I'm sure you 14 have heard much of this. 15 Number one, I really do appreciate the 16 fact that the Committee wants -- I'll use "CRPs" and 17 "NPAs" as the same thing -- for CRPs really to 18 subscribe and aspire to higher levels of quality, 19 management, governance. And we are concerned about 20 those issues as well as you. 21 In your deliberation in making rules the 22 one thing that I would urge you to do is to look to 27 1 the professionals in the field in standards setting, 2 such as CARF; the Council on Accreditation, and a 3 Joint Commission. They have spent decades developing 4 standards to certify folks. 5 We're certified. And the thing that I 6 like most about our CARF certification is that we 7 have a range of compliance, so it's not a particular 8 one-size-is-going-to-fit-all. And I would urge you 9 not to get locked into that. 10 The other thing is if you look at them 11 over a period of time they spend a lot of money in 12 doing the surveys, compiling the reports, but they're 13 also constantly adjusting those standards a year-to- 14 year basis because we're in a very dynamic and 15 competitive world and things, as you know, change 16 from day to day, if not from hour to hour. 17 Concerning executive compensation, I think 18 the reason that we're probably all here is we have a 19 few bad apples in the Program. IRS needs to deal 20 with them about excessive compensation, self-dealing, 21 and unethical behavior. I think that's a real issue 22 that's driving -- 28 1 MS. ZEICH: I'm sorry to interrupt. If 2 you could please speak a little closer to the 3 microphone, for all the speakers. That will help us 4 record. Thank you. 5 MR. MCMILLAN: Okay. Is that better? 6 MS. ZEICH: Thank you. 7 MR. MEAD: I think there are a few bad 8 apples that need to be dealt with. Less than one 9 percent of the entire JWOD-producing CRPs are 10 reflected in those four or five organizations I think 11 that have been identified and hit the media. 12 I would submit to you that most of your 13 CRPs are dedicated to following good, ethical 14 business practices and have high standards. One of 15 the really important part is we're in this business 16 because we care about people with disabilities. I 17 mean we're mission driven. This is not about those 18 other metrics that keep being brought up in the 19 media. 20 We would like in rulemaking for you to 21 help empower us, not encumber us. Additional layers 22 of standards that are repetitive or redundant drive 29 1 up our operating costs and manpower, because this 2 doesn't come at no cost. In order for us to meet our 3 government customers' needs, we have to meet price, 4 quality, and on-time delivery. Anything that gets us 5 focused so internally that we're not being able to 6 compete externally creates problems for us and 7 ultimately the loss of jobs for people with 8 disabilities. 9 The CRPs that are producing in the JWOD 10 Program are incredibly diverse. And as you make 11 rules concerning governance, we would -- I believe, I 12 personally believe that there is real strength in 13 that diversity. It's really different for a small 14 CRP in the middle of nowhere to run a program that 15 had the kind of board diversity that I might have in 16 Atlanta. We really need some reality check on that. 17 I believe that there are rules in place 18 through the intermediate sanctions and through IRS 19 that can deal with these issues of excessive 20 compensation and self-dealing. And those are the 21 issues that have brought everything to the table. 22 I think, if anything, if the Committee 30 1 could think beyond trying to meet minimum standards. 2 How is it that you can help CRPs build capacity and 3 do a better job. One way that I would submit to you 4 would be that if you could take CARF certification as 5 a safe harbor for CRPs in meeting governance 6 requirements, and then have mechanisms to help small 7 organizations pay for that certification -- for many 8 they don't have the resources to do it -- that would 9 be helpful. 10 We all want to be good team members and we 11 want to provide the highest quality of service, but 12 the main thing is we want to create jobs. CRPs, in 13 the final end, are the JWOD Program. We're here to 14 make this work. And I thank you for the opportunity 15 to comment. 16 CHAIRPERSON SCHWALB: Thank you. Did you 17 want to take a crack at that question about the wage 18 level of workers? 19 MR. MCMILLAN: First of all, the only 20 subminimum wage in my organization has to do for 21 people who are in Work Adjustment Training. We do 22 not pay subminimum wage to employees on contracts. 31 1 We do primarily service contracts. 2 I have no -- I mean I believe that people 3 should go at least minimum wage. The issue is for 4 the folks that come in at a ten-percent production, 5 ten percent, we generally can get them up to 30 6 percent. But even if you get them up to 30 percent 7 on a $7 minimum wage, you're talking about $21 per 8 hour. 9 The margins in contracts that we operate, 10 and all our contracts have to be self-sustaining, 11 would not allow us to have individuals who function 12 between 20 and 30 percent and there be enough money 13 to cover that because, remember, in a lot of these 14 cases we have to provide supports and got job coaches 15 as well. So I don't have it from a practical 16 standpoint, but from an economic standpoint it 17 doesn't seem to me that it works without some money 18 coming in from a different direction. 19 CHAIRPERSON SCHWALB: You mentioned nobody 20 makes less than minimum wage. Under the Service 21 Contract Act of course there's a floor that's 22 essentially established, but even that has the 32 1 application of the Commensurate Wage Provision, so 2 there are people who could be making less than the 3 Service Contract Act based on productivity. Is that 4 the case in your organization? 5 MR. MCMILLAN: Not in my organization. 6 CHAIRPERSON SCHWALB: Okay. Second 7 question, just to follow up on a point you made. 8 Earlier in your remarks you said that there are 9 certainly some bad apples that need to be rooted out 10 and dealt with, and you agreed with that. 11 Could you give me a sense, just in general 12 from your perspective, what kinds of things that you 13 would define or what characteristics would make a bad 14 apple? 15 MR. MCMILLAN: For me, looking at the 16 situations we have here, it's where there is self- 17 dealing and unethical behavior between a board and a 18 CEO. In some cases -- and I can only respond to what 19 I've read in the media -- there obviously no conflict 20 -- there was conflict of interest between purchasing 21 from board members. I think that really creates 22 problems. 33 1 The other one is that the board and the 2 executive seem to be self-dealing throughout it, and 3 I think that's very, very unfortunate. I don't know 4 how that situation got started. I guess you're 5 always going to have a few bad folks at some point, 6 but it's basically when there is no oversight by the 7 board of the executive and then they start dealing 8 with each other. 9 CHAIRPERSON SCHWALB: And just from what 10 you've read, including your reference to bad apple, 11 is there any compensation consideration or all your 12 considerations really around governance and the 13 relationship upon the board-and-CEO type of things? 14 MR. MCMILLAN: Well, I think there's not a 15 per se test for me on compensation because even the 16 IRS in their Safe Harbor Provisions say that if a 17 board uses objective third-party data to set this and 18 there's no interest on their part, that there was a 19 presumption that it is correct until it is proved 20 otherwise. And that, I like that because there are 21 so many different elements as to what is excessive 22 compensation. 34 1 Does someone who is in a small CRP who 2 makes $90,000 in a rural area where that would be an 3 extremely high compensation for an organization, 4 let's say, is less than a million dollars, that may 5 be high, I don't know. 6 I think the issue is what is the litmus 7 test to give you a prudent measure of whether someone 8 is excessively compensated or not. 9 CHAIRPERSON SCHWALB: Thank you. 10 Andy or Jim, anybody, you have questions? 11 Bob or Roy. Roy has one. 12 DR. GRIZZARD: The thought just went 13 through my mind, and you can respond to it, or anyone 14 else, or written. At the end of the year we don't 15 have profits. I used to recall that we used the term 16 in our industries as "Return to working capital." 17 And it was money that could be used for venture 18 capital to advance more job opportunities. 19 At the end of the year if a nonprofit has 20 accrued a return to working capital or a certain 21 amount of, quote, profit in a nonprofit organization, 22 what's your thought on -- and putting this in 35 1 percentage perspectives because, as you said, I know 2 I paid more for my taxi ride last night than I do in 3 other parts of the country, so I assume that that 4 compensation is different in San Francisco than it 5 might be in Sacramento or Boise or Miami or Houston 6 -- of taking a percentage of that amount at the end 7 of the year and allocating that to future seed 8 capital for new ventures to create jobs and then 9 taking that other portion of it and on a pro-rata 10 basis, based on the scale and the level that the 11 employees are at, whether they do not function at a 12 high level or function at a high level and whatever 13 the skill level is, and then make a pro-rata, kind of 14 a bonus at the end of the year to compensate those 15 individuals? Any thought on that? 16 MR. MCMILLAN: Yeah. The whole issue I 17 think is what are we trying to achieve with funds, 18 net revenue that comes out at the end of the year. 19 Let me tell you what we did. 20 We said we have a group of folks who are 21 functioning at a very low level, a very low level 22 capacity. We're trying to develop document 36 1 destruction and computer recycling, because these are 2 jobs that they can do well at. By the way, they get 3 offered medical benefits and they get paid pension. 4 And we said let's look at what's going on, because 5 these are the folks that are most likely not to be 6 employed competitive. 7 We created a program called Work and 8 Progress, which is we're going to start to working 9 with them developmentally on their social skills 10 because this is one of the areas that we really need 11 to work on. We cut their hours in half and pay them 12 for their total hours, as they were before so there's 13 no loss in pay, and then we put in a program, an 14 enrichment program that works on mental stimulation, 15 academic work, field trips, and this, because this is 16 an area we really, really need to work on. 17 What you're talking about is what we 18 believe in, is how do you take your excess revenue 19 and grow mission, because the whole purpose of being 20 tax exempt is you take those funds to grow mission. 21 The other thing that we do with excess 22 revenue is it allows us to do -- well, actually bring 37 1 on new contracts. If I start a mailroom operation in 2 which I'm employing 12 people I've got to have 3 $60,000 in cash that's going to be tied up in the 4 system by the end of the first couple of months. And 5 so we have to have money that's in the system that 6 allows us to grow programs. 7 JWOD for us is 16 percent of our budget. 8 We look at developing commercial lines, state-use 9 presumes, and even philanthropic opportunities to 10 grow our programs. We believe our clients are why 11 we're there, and so we're looking for creative ways 12 to do this. It's primarily focused on work, but 13 there is more to life than work, and we're committed 14 to doing that. 15 So I think I like your idea of saying what 16 do we do with excess revenue, but the question is: 17 Where do we want to go with that? Ours is that you 18 need to work on develop not only job skills but you 19 need to develop social skills as well. 20 Does that answer your question? 21 DR. GRIZZARD: Yeah. Like I said, what I 22 was getting at, and it's kind of a piggybacking on 38 1 Mr. Houghton's comment, is at the end of the year 2 individuals that had not been -- they could get bonus 3 and get more actually pay through taking a certain 4 percentage. 5 I think that you do need a certain 6 percentage of money to grow your organization, to 7 grow missions, to look for new targets of 8 opportunity. There's no doubt about that. But then 9 to take another percentage and then pro-rata break it 10 down based on the step or the scale that the person 11 with the disability finds wherever they are on that 12 pay scale and just divide the pot up into a bonus 13 pool. That's just a thought that ran through my 14 mind. 15 MR. MCMILLAN: Actually one of the things 16 that we have is some of the folks in our JWOD 17 Programs are actually earning such good salaries and 18 with the health and welfare portion of it, that other 19 competitive employment outside JWOD has to pay a heck 20 of a lot more, so. 21 MR. HOUGHTON: Yes. Mr. McMillan, what of 22 the Committee's recommended governance standards does 39 1 your organization currently not employ? I mean you 2 may not have the list in front of you. 3 MR. MCMILLAN: Well, I looked at the 14. 4 The one that I didn't quite understand was geographic 5 representation on the board, because for us, we're in 6 more than one state, and I didn't quite understand 7 that. 8 We have diversity attributes on our board 9 that we recruit for that reflect the community -- the 10 basic community in Atlanta, but I didn't quite 11 understand. The other ones, we don't have any 12 problems with. That was really a question for you. 13 What does that mean? 14 MR. HOUGHTON: The geographic 15 representation, I believe, is a representation of not 16 only geographic -- the areas in which your 17 organization is represented but also the population 18 of which your organization serves. So a reasonable 19 representation of those demographics that are 20 directly related or benefit as a result of your 21 services. 22 The -- so basically what you're saying is 40 1 you're already employing these practices for the most 2 part because you have, at least in your opinion, good 3 governance standards? 4 MR. MCMILLAN: We have high aspirations 5 and in my testimony I state that, number one, we won 6 the Diversity Award for Georgia a year and a half 7 ago, won the Management of Excellence Award. We have 8 two Exemplary from CARF. We're looking at the 9 Malcolm Baldridge criteria to see how we can do that, 10 very much. 11 I've requested money from a foundation to 12 do more board development and staff development, 13 because -- and this is the issue. If we really can 14 get our folks to aspire to high standards and can 15 help them in capacity-building, they self-monitor 16 theirselves and move forward. And then that's where 17 I think you can have a great opportunity. When we 18 get into rulemaking it's about turning the screws 19 down. 20 And, like I say, we're in a competitive 21 market, that what we need to be doing is empowering 22 people. I mean that's the whole process that we go 41 1 through with the clients that we see, empowering 2 people, changing lives, and moving forward. And, 3 honestly, that's what we need your help with. 4 MR. HOUGHTON: I guess if I hear you 5 correctly, by the Committee imposing these governance 6 standards it really wouldn't effect any undue 7 hardship on your organization? 8 MR. MCMILLAN: It only depends on how 9 they're enforced. If I get another layer of "Do it 10 this way. Do it that way," we're audited, we get an 11 A133. I have the City of Atlanta coming in. I have 12 the State of Georgia, I'm licensed there. And then 13 if you come in with a whole other set of requirements 14 for me to give you feedback on in terms of doing 15 this, and I'm doing the same thing over and over 16 again, it does create additional burden and work on 17 us. And it's not quite as simple as it seems. 18 Like I say, we work hard to keep our 19 organization flat and keep our expenses down. I 20 don't have any problems -- as a matter of fact we 21 kind of enjoy exceeding standards, but there's a cost 22 to it. And some folks may not be where we are, and I 42 1 can't speak for other CRPs. 2 MR. HOUGHTON: Thank you. 3 MR. MCMILLAN: Thank you. 4 CHAIRPERSON SCHWALB: Jim. 5 MR. OMVIG: Steve, I do have a question. 6 A couple of questions. On again the 7 executive compensation, as a Member of the Committee 8 people throw all kinds of ideas at me as to what we 9 might do or not do. One has suggested that we don't 10 set any upper limit at all but that we require the 11 nonprofit, wherever it is, to have full disclosure to 12 the public in its community about all of the benefits 13 that CEOs receive. And, again, not just salary but 14 the total, full package. What would your impression 15 be of that as a way to deal with this? 16 Obviously a factor here is the public 17 perception nationally but also in the community where 18 the various programs exist. 19 MR. MCMILLAN: When you're an executive of 20 a nonprofit organization your 990s going to be put 21 out on GuideStar. We disclose to all of our funders, 22 we disclose to the general public. We're constantly 43 1 disclosing the information. 2 I think disclosure is there. That's a 3 reality that we deal with. I think where we're 4 coming from is that if there are rules that are set 5 in a vacuum about what an upper limit should be, that 6 it doesn't -- and I don't see any real benefit, if I 7 have a good executive committee who has access to 8 compensation data and maybe even uses an outside 9 consultant, and they do a good due process in doing 10 that, we've been doing that, then we're on solid 11 ground. 12 And if you say, okay, you make more than 13 $190,000, or whatever your cap is, come in and 14 explain it, what service does that do for you or for 15 us? Because we've done the due diligence and the 16 process. I don't have a question that you need some 17 assurance that individuals are not self-dealing and 18 are meeting IRS regulations concerning compensation, 19 my real question is: Are you the ones that should be 20 doing it or should it be, I guess, IRS. 21 MR. OMVIG: Um-hum. Another thing that's 22 been suggested is that we set some reasonable level 44 1 with an understanding that there will be exception 2 based upon extenuating circumstances. And right back 3 to the size of the organization and the number of 4 employees, and all of those things. How would you 5 feel about that, if we set a basic cap with an 6 understanding that it can be exceeded and then needs 7 to be justified? 8 MR. MCMILLAN: In principle I do not have 9 a particular issue with that because I think what 10 you're really -- what you really need to focus on is 11 not so much the salary but the process, was there a 12 good process between the board doing what they should 13 do in terms of good governance. 14 And I guess it seems to me that there is 15 the presumption here that something's wrong simply 16 because of a number instead the presumption is you 17 need to be able to justify why you've done it. And I 18 may not be answering your question, but I think if 19 you look at the 550 or so producing you probably have 20 25 organizations where CEOs are compensated more 21 than, say, $170,000, or something. 22 And I guess I feel like if my board, who 45 1 is a private corporation and is meeting standards and 2 following due diligence in making their decisions, 3 that it seems a bit onerous then to have to come back 4 and come before yet another group to justify the 5 decisions they've made. And philosophically I have a 6 little issue with that. Probably -- 7 MR. OMVIG: It's a difficult situation. 8 Our dilemma is the press of course has reported. 9 They look at the ones that are 500,-, 600,- $800,000, 10 and that looks extreme. As some people say, that 11 doesn't pass the smell test. 12 Congressmen also read the newspapers and 13 so all of a sudden Congress takes a look at us and 14 says, you know, 'Isn't somebody watching that 15 program? I thought it was paid to make jobs for 16 people with disabilities. What's happening here?' 17 So there is that kind of thing happening. 18 I don't have in braille the list of 19 everybody, are you the CEO of your program? 20 MR. MCMILLAN: I am. 21 MR. OMVIG: And what is your total 22 compensation? 46 1 MR. MCMILLAN: I believe it is $208,000. 2 MR. OMVIG: Okay. All right. Thank you. 3 CHAIRPERSON SCHWALB: Thanks very much. 4 MR. MCMILLAN: Thank you so much. 5 MS. ZEICH: The next speaker is Doug Barr. 6 If you will please come to the podium. 7 Thank you. 8 CHAIRPERSON SCHWALB: Good morning. 9 MR. BARR: Good morning. Mr. Chairman, 10 Members of the Committee, my name is Doug Barr. I'm 11 the President and CEO of Goodwill Southern 12 California, which has been a JWOD-producing agency 13 since 1993. 14 Founded 90 years ago, our Goodwill serves 15 all of Riverside and San Bernardino Counties as well 16 as all of L.A. County north of Rosecrans Avenue. 17 Our staff numbers 1650. Our 2006 budget 18 is 68.5 million, of which 1.5 percent comes from JWOD 19 revenues. 20 We operate 46 stores, 47 next week; 39 21 attended donation centers; and 19 workforce job 22 centers through which in 2005 we served over 20,000 47 1 individuals who were disabled or had vocational 2 disadvantages. 3 The Committee recommends 14 best practices 4 as benchmarks for agencies operating under the JWOD 5 Program and asks the question: "Are these criteria 6 comprehend and inclusive enough to ensure good 7 governance to qualify an agency for inclusion in the 8 JWOD Program?" 9 In general I believe the answer is yes, 10 the Committee has identified excellent benchmarks. 11 Let me suggest some enhancements. 12 Practice number 2: One way to ensure that 13 an employee who is a member of the board does not 14 exercise undue influence is to make that individual 15 an ex-officio, nonvoting member of the board. This 16 allows the staff member, often the president and CEO 17 or a client-employee, to provide the board with 18 professional or constituency advice, but leaves the 19 decisionmaking up to the volunteer members of the 20 board. 21 Practice number 3: While a benchmark of 22 "not less than five but preferably more than seven 48 1 unrelated directors" is useful, it is important not 2 to regulate the maximum number of board members. Our 3 current number of directors is 37, but our bylaws 4 permit up to 51. 5 For an organization whose jurisdiction 6 covers over 30,000 square miles and over 12 million 7 inhabitants from diverse racial and cultural 8 backgrounds, the Committee's earlier suggestion of a 9 maximum of 15 directors is clearly inadequate, given 10 the very broad board project that we require to be 11 credible with our constituents. 12 Practice number 4: The sitting of term 13 limits is one method for encouraging new blood on a 14 board, but there are others. Our board has a board 15 of advisors, a nongoverning entity, to which we can 16 move less active directors while keeping them still 17 within the Goodwill family. 18 Each year approximately 15 percent of our 19 directors rotate off and join the board of advisors. 20 We see this as a preferable route to the imposition 21 of a maximum number of terms for directors. 22 Practice number 7: While it's useful a 49 1 designated board committee to undertake the hiring, 2 evaluation, making of recommendations regarding the 3 president and CEO's compensation, it should be the 4 entire board which formerly approves rather and is 5 merely informed about these decisions. You'd be 6 interested to know that as of January the 1st, 2005 7 under California Senate Bill 1262 it is unlawful for 8 any other body than the board of directors to decide 9 upon the compensation for a not-for-profit executive. 10 That's the law in California. 11 Practice 14: The proposal that boards of 12 JWOD agencies should arrive at and approve all 13 compensation packages for all highly compensated 14 individuals through a rebuttal presumption process is 15 a sound one and should go a long way towards 16 minimizing excessive compensation situations. The 17 board chair could also sign an annual statement 18 indicating that such a process was undertaken by the 19 board in approving the compensation packages of all 20 highly-compensated staff members. 21 The Committee also seeks comment on the 22 wisdom and adequacy of accreditation by one or more 50 1 state or national organizations as evidence that a 2 charity is adhering to good governance standards 3 without further review by the Committee. 4 Currently every Goodwill in the United 5 States must be accredited by an external third party. 6 Of the 177 U.S. Goodwills, 131 are CARF accredited 7 with the balance accredited by either the state or 8 Goodwill Industries International. 9 Of special interest to the Committee is 10 that in 2005 CARF expanded its standards on 11 governance to include virtually all Sarbanes-Oxley 12 reforms. We believe that transparency is critical 13 for a not-for-profit to maintain its public 14 credibility and that accreditation offers a simple, 15 cost-effective method for the Committee to assure 16 itself that its JWOD providers are being governed in 17 a professional and responsible manner. 18 Regarding the effect of executive 19 compensation on fair market wage determination, I 20 need only refer you to the excellent analysis put 21 forward by Bob Chamberlin of NISH, that this 22 speculation does not hold up upon an examination of 51 1 the facts. 2 What is important for the Committee to 3 understand about executive compensation is this, and 4 so far this point has not been made, the local board 5 of directors must be the body to set the compensation 6 of a JWOD agency executive. Why? Because to attract 7 and retain top flight executives boards have to pay 8 compensation which is competitive in their local 9 markets. 10 Frankly, the top pay grade of a senior 11 federal civil servant in Washington has little 12 relevance for a not-for-profit board seeking to hire 13 and retain an executive in L.A., Phoenix, Denver, 14 Chicago, San Antonio, New York, or Miami. 15 Years ago former House Speaker Tip O'Neill 16 observed that all politics is local. Well, the same 17 could be said for the salaries of not-for-profit 18 executives. 19 If the local boards carry out their due 20 diligence by utilizing the presumption, the rebuttal- 21 for-presumption process, the Committee will have 22 obtained, I believe, the best protection it can 52 1 obtain against instances of excessive compensation. 2 Let me close by speaking to a comment some 3 Committee Members have been overheard to make to 4 attendees at previous hearings. Some even may feel 5 that because the public turnout and the number briefs 6 submitted at these three hearings has been limited, 7 perhaps the JWOD community doesn't care about these 8 matters. I would suggest an alternative analysis. 9 Recall that last year when the Committee 10 issued a Notice of Proposed Rulemaking, 166 public 11 comments were submitted. All but a few strongly 12 opposed the proposed rules. 13 My take on the low level of public 14 response therefore is that by moving away from its 15 previous definitive positions on governance and 16 executive compensation, and by listing best practices 17 and posing questions instead, the Committee has 18 presented itself as more reasonable and consultative, 19 with the result that there has been less concern from 20 the CRP community about recommendations that will 21 flow naturally from such a process. 22 However, if this public consultation is 53 1 merely an exercise and if the committee ignores both 2 past and present public input in attempts to push 3 through its original and much opposed recommendations 4 on board size and executive compensation, I predict 5 that there will be considerably greater opposition 6 when the actual regulations are promulgated. 7 I trust the Committee finds these comments 8 to be helpful and I appreciate the opportunity to 9 address you. 10 CHAIRPERSON SCHWALB: Thank you, Mr. Barr. 11 Just as a reminder for the Committee 12 Members who aren't familiar with this, it's true that 13 it's pretty much standard practice in most Goodwills 14 because of the mission that the portion of your 15 organization that does JWOD work is set up as a 16 separate related corporation; is that -- 17 MR. BARR: No. 18 CHAIRPERSON SCHWALB: It's not the case in 19 your Goodwill. 20 MR. BARR: We are able to meet the ratios 21 and exceed them. 22 CHAIRPERSON SCHWALB: Okay. And would it 54 1 be fair to say -- you said you have about one and a 2 half percent of your total revenue comes from JWOD. 3 Do you have a sense of what percentage of your 4 workforce is performing JWOD? You said you had 1500, 5 1600 employees? Is it about the same percentage or 6 is it -- I would imagine it's higher, the percentage 7 of your workforce? 8 MR. BARR: No, it's probably about the 9 same. Might even be less, yeah. 10 CHAIRPERSON SCHWALB: Okay. any thoughts 11 on the standard question on the philosophical issue 12 really, we're not debating a legal issue, but the 13 philosophical issue of whether people should be paid 14 the federal minimum wage irrespective of their 15 productivity level. 16 MR. BARR: I have asked my staff who are 17 in charge of this to opine on this, and their comment 18 was that they did not think for us that it would hurt 19 us that much, primarily because we have two major 20 programs. One is the Commissary at the El Segundo 21 Air Force Base and then an Army Reserve janitorial 22 contract. 55 1 At the Air Force Base we are now paying 2 DOL Wage Determination Rates. Now at the Army 3 Reserve we pay less than minimum -- or less than -- 4 subminimum wage because they perform at 75- to 80- 5 percent productivity. 6 We feel that if contract pricing takes 7 into account a consideration now for productivity 8 rate, if you change the rules we assume that 9 productivity rate would change as well in the pricing 10 model. So in that sense it wouldn't bother us. 11 On the other hand, the problem would 12 occur, I'm taking a jump now to the Congressional 13 hearings on JWOD, if Congress decides that JWOD 14 should not be a place of permanent employment for 15 people with disabilities and who are blind but as a 16 transitional employment, which is not the original 17 concept but it seems Congress is looking at this, 18 that would change our impression. Because the reason 19 that we don't have a problem with this proposal is 20 because our workers have been a long time. And the 21 longer you're there doing a repetitive task the more 22 efficient and productive you get. 56 1 Therefore some of our -- most of our 2 workers, for instance the commissary, are at a 3 hundred percent productivity. They weren't the day 4 they began, but they are now. If this was to become 5 a flow-through, if JWOD was a flow-through program, 6 say max five years in terms of employment and then 7 out, it would be very different because you'd have 8 people at varying levels of productivity along and 9 that would change. 10 CHAIRPERSON SCHWALB: Okay. Thank you. 11 Andy? 12 MR. HOUGHTON: Yeah. I guess just a 13 clarification on what you just said. Isn't it really 14 up to the individual that works there? It's not a 15 permanent job, I mean it's not -- 16 MR. MCMILLAN: Absolutely. 17 MR. HOUGHTON: -- a dead-end. I don't 18 think that was your intent, as I understand. 19 MR. MCMILLAN: Oh, I wouldn't say it was a 20 dead-end at all. For many of the people we place 21 it's a wonderful job. 22 MR. HOUGHTON: I mean it's not their only 57 1 out. If they desire to move into other type so forth 2 jobs, be it within the Goodwill organization or 3 external to the organization, -- 4 MR. MCMILLAN: They can do it. 5 MR. HOUGHTON: -- they can do that? 6 MR. MCMILLAN: And we encourage that, but 7 the reality is that because the pay is good, the 8 benefits are fabulous, they like to stay. And who 9 could blame them? 10 MR. HOUGHTON: I agree. 11 MR. MCMILLAN: But if it's going to be a 12 temporary situation, they're going to be moving out, 13 then you're going to have people, their productivity 14 overall and each contract will go down. 15 MR. HOUGHTON: Um-hum. Thank you. 16 CHAIRPERSON SCHWALB: Jim, do you have a 17 question? 18 MR. OMVIG: Yeah. Well, I'll just ask my 19 standard question then: What is your total 20 compensation? 21 MR. MCMILLAN: And let me lead into that 22 by telling you how we go about sitting it. My board 58 1 looks at several surveys and one of the surveys they 2 do is of the top 22 not-for-profits in Los Angeles. 3 And just so you're aware of what that 4 reveals, last year it revealed that the median, not 5 the mean, not the average, but the median, 50 percent 6 above, 50 percent below total all in compensation was 7 $334,000, okay. 8 My salary is 226,-. I get a bonus on top 9 of that if we do well and I have deferred comp. My 10 total package comes to 349,-. Now in my view I'm 11 extremely well paid. I started 35 years ago at 12 $7200. I'm a social worker by training. But my 13 predecessor had no provision for his deferred 14 compensation or any kind of pension, and the board in 15 his last year realized they had made a drastic 16 mistake and so I'm the beneficiary of their learning 17 of a lesson, that you can't do that. And so they pay 18 me well in terms of a deferred compensation. 19 MR. OMVIG: Thank you. 20 CHAIRPERSON SCHWALB: Questions? Bob, 21 any? 22 MR. KELLY: No. 59 1 CHAIRPERSON SCHWALB: Thank you very much. 2 MR. MCMILLAN: Thank you. 3 MS. ZEICH: The next speaker will be Mr. 4 Tom Miller representing the NISH Board in place of 5 Fred Frese. 6 MR. MILLER: First of all, I'd like to 7 thank you all for having me here. And I want to make 8 it clear that I am a JWOD participant. I do work on 9 a JWOD contract and I'm also an advisory to the Board 10 of Directors of NISH. 11 As far as the executive compensation, what 12 I'd like to say about that is that's up to the 13 executive committee on their own boards who 14 determines what the chief executive officer makes. 15 It's not NISH's or anybody else's. We can't do 16 anything about that, but I do agree it's too much. 17 If you got somebody making a million 18 dollars a year or 800,000, that's way too much money. 19 So it's their problem within their own board, because 20 after the executive committee brings it to the board 21 for approval, it's the whole board's responsibility 22 to make sure they get a fair pay. But I believe 60 1 that's way too much. As far as that goes that's all 2 I got to say about that. 3 But I would like to talk about the 4 subminimum wage, if I could, because I work directly 5 with individuals that are low productivity. 6 I'll tell you, first of all, I don't agree 7 with subminimum wage. I wish that everybody that 8 worked in society or the community could make at 9 least minimum wage. In my opinion the reason they 10 have subminimum wage is because these low functioning 11 individuals, they just can't go out and get a job, 12 walk into any company, organization and get a job 13 because of their disability. 14 And they say peoples not, they don't 15 discriminate. People do discriminate. They might 16 not do it intentionally, but they do. So when they 17 come in for a job, they're not going to hire them. 18 They don't look at their ability, they look at their 19 disability. That's the problem we go. 20 So I think they need education on that, 21 but I've worked with a lot of individuals, subminimum 22 wage individuals, and they don't worry about how much 61 1 money they're making. They don't come to work and 2 say, 'I don't make the same amount as you do.' They 3 care about going to work. 4 They have a job. It gives them life. 5 Because without JWOD, I guarantee you they wouldn't 6 be working. They'd be sitting at home doing nothing, 7 or whatever they do whenever they're not at work. 8 But they come to work, they do their job. They're 9 probably, I would say, the most dedicated workers 10 that we have. 11 Well, basically that's all I got to say 12 because I know there's more to it than just money. 13 And I know, because I got two daughters of mine own, 14 it takes money to raise a family. But to them 15 there's more to it than money. It's life. We give 16 them life through the JWOD contract. And I guarantee 17 you that. 18 I know it's short and sweet, but that's 19 how I like to do mine, short and sweet you know. 20 (Applause.) 21 CHAIRPERSON SCHWALB: Thank you, Mr. 22 Miller. Let me see if we have any -- you pretty well 62 1 addressed that standard question I was going to ask, 2 so I'm not going to repeat it. 3 Bob, did you have any questions? Roy, 4 Andy? 5 MR. HOUGHTON: Just first a clarification. 6 Do you work as a direct labor? 7 MR. MILLER: Yes, sir. I get -- well, I'm 8 not sure if I understand. Yeah, I get time-studied, 9 if that's what you mean. 10 MR. HOUGHTON: Okay. And how is your -- 11 do you get paid based -- 12 MR. MILLER: A hundred percent. 13 MR. HOUGHTON: You're a hundred percent 14 productive. 15 MR. MILLER: Yeah. 16 MR. HOUGHTON: And how long have you 17 worked for JWOD? 18 MR. MILLER: Fifteen years at Ellsworth in 19 South Dakota, Ellsworth Air Force Base on the Food 20 Service. Fifteen years. 21 MR. HOUGHTON: And did you start out a 22 hundred percent productive? 63 1 MR. MILLER: I don't -- you know, I think 2 I did and that's just because I work hard. Whenever 3 you're getting time-studied, and I have cerebral 4 palsy. I'll tell you what I have. And when I'm 5 being time-studied and I'm being time-studied against 6 a person who don't have a disability, I'm going to 7 try to outwork them, you know what I mean? That's 8 just me. 9 MR. HOUGHTON: Um-hum. 10 MR. MILLER: Because I don't agree with 11 time studies either. I mean they're wrong, but the 12 law is the law and we got to go by it. 13 MR. HOUGHTON: Um-hum. And do you get 14 paid benefits? 15 MR. MILLER: Oh, yeah. 16 MR. HOUGHTON: Do you have retirement, do 17 you get a -- 18 MR. MILLER: Retirement, no. No, no, no, 19 but we got health insurance. Vacation, paid 20 vacation. 21 MR. HOUGHTON: And do you know if any of 22 the executives in your organization receive 64 1 retirement? 2 MR. MILLER: You know, I don't want to be 3 -- I'm not positive, but when I talk to a few of them 4 I think they do. They just don't want to tell me. I 5 would assume there is some kind of package there, a 6 package deal. Because if I get vacation -- I'm sure 7 they do of some kind. 8 MR. HOUGHTON: It seems to me, I mean if 9 -- 10 MR. MILLER: But I know our CEO doesn't 11 make -- oh, he don't make -- I don't know, a hundred 12 thousand maybe, if that. 13 MR. HOUGHTON: I wish we had more people 14 like you who spoke on behalf of this program and 15 shared their experiences. And I applaud you for 16 sharing your story and your comments with the 17 Committee today. 18 MR. MILLER: I thank you, but I do think 19 that we need to somehow give them more money somehow. 20 I don't know how. You know I think about it a lot. 21 I don't know how to get them more money, because they 22 don't understand about life. I mean they understand 65 1 about life, but living, money, because somebody's 2 always taken care of that for them. And they don't 3 understand how big of a stress they don't have on 4 their shoulders, but I would like to see the money go 5 up. 6 MR. HOUGHTON: Do you know why JWOD exists 7 and why is it here in your -- 8 MR. MILLER: Yeah. Why, in my opinion? 9 MR. HOUGHTON: Yeah. 10 MR. MILLER: Because the community's 11 prejudiced. Without JWOD, individuals with 12 disability, we're almost what 42,-, 43,000 maybe? 13 MR. HOUGHTON: Um-hum. 14 MR. MILLER: We wouldn't have no jobs. I 15 wouldn't have a job. And that's the truth. I could 16 take you, if you ever got time, downtown here, back 17 in South Dakota, anywhere, and fill out a resume. 18 And I guarantee you I won't get that job. I 19 guarantee you. 20 I could go, I would say ten, ten places. 21 I might get one interview. It's happened to me all 22 my life. I know what it's about. You know I'm not 66 1 here trying to whitewash the Committee or anything. 2 I'm here to tell you the truth in my opinion, which 3 is right. I'm right. 4 (Laughter.) 5 MR. HOUGHTON: Obviously. 6 MR. MILLER: It's just a terrible thing. 7 We need education. If we got education for the 8 community I think it would be a lot better for people 9 with disabilities to go out and get a job on their 10 own. A lot of them won't have jobs because they need 11 supports there on the job with the AIs that help them 12 with their job. And some of them is always going to 13 need the supports, but at least they're working and 14 they're happy. 15 MR. HOUGHTON: Thank you. 16 MR. MILLER: Thank you. 17 MR. KELLY: Yes, sir. As far as applying 18 for other jobs outside of your program have you tried 19 recently? 20 MR. MILLER: Have I tried recently? 21 MR. KELLY: Because there's been 22 legislation passed and -- 67 1 MR. MILLER: Yes, sir. 2 MR. KELLY: -- and the ADA as well as I 3 hope, I'm sure different attitudes in the past. 4 MR. MILLER: Okay. Yes, sir, I have, and 5 this is true and I could tell you. About a month 6 ago, and I'm actually going through voc rehab to get 7 help, okay, just a rehab, to help them find me a job, 8 another job. I'm not saying that I'm tired of the 9 one I got, it's just to expand my skills, or 10 whatever. And right now they're at a standstill 11 because they don't know what they're going to help me 12 with. 13 And I've been to two meetings with them, 14 so two, yeah, two meetings with them so far, and they 15 still don't know where they're going to help me find 16 a job, in what area. That's the truth. They're not 17 sure what they're going to do with me. And this is 18 only a month ago, month and a half. Actually I'll 19 probably be going back down there to them. 20 It's not easy to find individuals jobs out 21 in the community for competitive employment, so. 22 CHAIRPERSON SCHWALB: Did you have follow 68 1 up? 2 MR. KELLY: No. Thank you very much. I 3 just notice in life nothing is worthwhile is easy, 4 unfortunately. 5 MR. MILLER: That's true. 6 MR. KELLY: But keep fighting for it. 7 MR. OMVIG: Yes. This is Jim Omvig. 8 Appreciate your talking today, Mr. Miller. And you 9 got started short and sweetly, and then we didn't let 10 you stick to that, did we? 11 MR. MILLER: But it's good. 12 MR. OMVIG: A question I want to ask you 13 since you work in the program, and this is a 14 difficult one, I don't know that I know the answer 15 myself, but I'd be curious from your point of view as 16 a worker. 17 You've heard us talking about the minimum 18 wages and pay and all of the workers really good 19 wages and whatever is fair within the communities in 20 which they work. Some people have suggested that if 21 -- well, I'll make an assumption. Some people maybe 22 really honestly are not fully productive. Some are. 69 1 There have been some who would suggest if 2 you pay the minimum wage to people who are not really 3 fully productive, then those who are fully productive 4 are going to kind of resent it. They say, 'Well, 5 here I am working hard all day. I get paid for 6 everything I do. And Joe Blow is sitting beside me, 7 only does about half the work I do, and he still gets 8 paid the same amount that I do.' 9 As I say, I don't even know the answer to 10 that question. Do you have any impression? What do 11 you understand people would feel in your program? 12 MR. MILLER: Well, sir, exactly what 13 you've said because I've heard it where I work. I've 14 had discussions with the nondisabled for the last 15 15 years, you know, about who makes more money. Why 16 should a disabled person make the same amount as a 17 nondisabled person. 18 MR. OMVIG: I see. So you're working on 19 this, though, from the nondisabled people, -- 20 MR. MILLER: Right. 21 MR. OMVIG: -- which is an interesting 22 question of itself. I was asking among -- 70 1 MR. MILLER: Right. 2 MR. OMVIG: -- the people with 3 disabilities. If there's somebody, you for example, 4 I would be you would be productive wherever you're 5 working and, as you said, a hundred percent 6 productive. Would you, maybe I'll just stick it to 7 you, would you personally feel -- or narrow it I 8 meant to you -- would you personally feel any 9 resentment if somebody new comes along, they get paid 10 also the minimum wage and you know they really don't 11 quite get the same kind of -- or they don't produce 12 quite as much as you do, but there they are getting 13 equal pay with you? Would that cause you any 14 problem? 15 MR. MILLER: No, sir. No, sir. And I can 16 say this from experience, because that's what we talk 17 about a lot. I don't care. I want them to make the 18 same amount. Even if I wasn't disabled, I mean in my 19 heart I am what I am. But even if I wasn't disabled 20 I would want them to make the same as I do, at least 21 minimum wage. At least. 22 MR. OMVIG: Good for you. 71 1 One last question. Just what kind of work 2 do you do on the program? 3 MR. MILLER: I'm in food service. 4 MR. OMVIG: And what, do you serve food, 5 you cook, you cashier? 6 MR. MILLER: I do it all, but the cooking, 7 I'm a team leader now, that's below a supervisor? 8 MR. OMVIG: Uh-huh. 9 MR. MILLER: But I've worked from the 10 ground up and it took, what, 13 years to get to where 11 I am today. 12 MR. OMVIG: Good. 13 MR. MILLER: I do it all. 14 MR. OMVIG: Thank you. 15 CHAIRPERSON SCHWALB: Thank you very much. 16 Appreciate it. 17 MR. MILLER: Thank you. 18 MS. ZEICH: I'd like to ask the next 19 speaker to please come to the podium. That would be 20 Rhea Nelson. 21 MS. NELSON: Good morning. I am Rhea 22 Nelson, Executive Director of New Leaf, Inc., Oak 72 1 Harbor, Whidbey Island, Washington state. I am the 2 Northwest Representative to the NCWC, National 3 Council of Work Centers; and a member of the 4 Workforce Development Council for four counties of 5 Northwest Washington, representing community-based 6 organizations. 7 I appreciate the opportunity to comment 8 with respect to nonprofit agency governance and 9 executive compensation. And if I put on my glasses 10 I'll do better. 11 New Leaf holds the first JWOD service 12 contract. Our grounds maintenance contract at NAS 13 Whidbey Island, which commenced in 1972, was the 14 pilot for service contracts. We currently hold four 15 JWOD contracts and employ approximately 100 people 16 with disabilities on those contracts. 17 We are in complaint compliance with JWOD 18 and NISH, and employees with disabilities comprise 86 19 percent of our workforce. 20 At our recent NISH compliance review we 21 had no discrepancies. We are currently in the 22 process of becoming accredited by CARF, which is a 73 1 mandate in Washington state, and previous to the 2 mandate received a three-year full accreditation from 3 Rehabilitation Services Accreditation System. 4 The New Leaf Board of Directors has bylaws 5 and policies which meet or exceed the proposed good 6 governance practices the Committee for Purchase has 7 cited in the Federal Register of December 16, 2005, 8 with the exception of Number 4 which states, and I 9 quote: "The organization's bylaws should set forth 10 term limits for the service of board members." 11 New Leaf is located on a small island in 12 Washington state in the town of Oak Harbor, which has 13 a population of 18,000. We are considered by the 14 Department of Agriculture to be a rural area, and as 15 such recruiting board members is a challenge. 16 Local citizens who consider board 17 membership a community obligation volunteer on 18 several boards. And new board members are 19 increasingly hard to recruit. We value the guidance 20 and experience of our board of directors and would be 21 severely hampered by setting term limits. 22 I have taken this issue to my Board of 74 1 Directors and they unanimously oppose any rule that 2 would limit board members from serving consecutive 3 terms. 4 New Leaf is always adding new board 5 members as others leave. We see value in seasoned 6 board members working side by side with the new ones. 7 We are also fortunate that we have a very 8 diverse board of directors from our community. Our 9 nine members of our Board of Directors have committed 10 in writing to standards of excellence and a code of 11 ethics which addresses conflict of interest, 12 disclosure, provisions for recusal, sanctions, 13 removal for cause, and addresses integrity, 14 objectivity, and gratuities. 15 We have policies protecting 16 whistleblowers, policies for records retention and 17 access, confidentiality, nepotism, malfeasance, 18 misfeasance, grievance, employee rights, executive 19 compensation, and follow board-approved financial 20 procedures. 21 We never have considered executive 22 compensation as a factor in a fair market price or in 75 1 contract pricing. We use PR-3 as a market-based 2 price analysis in determining contract pricing. 3 Concurrently and independently, the contracting 4 activity develops the government estimate of cost and 5 ultimately both parties agree to a fair and 6 reasonable price. Executive compensation is never a 7 consideration. 8 We believe that the executives of 9 not-for-profits to exceed what is reasonable for 10 compensation should be dealt with individually. NISH 11 recently performed a survey of IRS Forms 990 for 12 JWOD-producing CRPs which confirms that the mean, 13 median, and mode of executive compensation for these 14 CRPs is at or below the national average for NPA 15 executive compensations as reported by the Senate 16 HELP Committee on October 20th, 2005. This 17 verifiable data should be relayed to Congress and to 18 other stakeholders who demonstrate that media reports 19 of executive compensation extravagance are rather 20 exceptions for JWOD-producing CRPs. 21 Executives who administer JWOD contracts 22 have more than challenging jobs and must be 76 1 compensated adequately or will move onto other 2 careers. Dedication to the mission alone cannot 3 suffice for retention of top executives. 4 We applaud the Committee's efforts to 5 maintain credibility and protect the JWOD Program. 6 We hope, however, that additional monitoring of 7 compliance won't divert our shrinking resources in an 8 ever-changing marketplace. Thank you for this 9 opportunity to comment. 10 CHAIRPERSON SCHWALB: Thank you. Before I 11 ask my first question let me just note to one thing 12 you said and perhaps share a secret that Northwest 13 natives like myself don't often share. It's standard 14 practice in Washington state to always bemoan the 15 rain and the weather as an effort to discourage 16 tourism -- or not tourism but permanent relocations. 17 (Laughter.) 18 MS. NELSON: We lie. 19 CHAIRPERSON SCHWALB: Yeah. I'm a Seattle 20 native and I used to do the same thing. 21 Your reference to a small rural adequate 22 island is not a quite adequate description of Whidbey 77 1 Island. It's one of the most beautiful island in the 2 world, actually the second largest-island in the 3 United States. Second only to Long Island, New York. 4 MS. NELSON: Geographically. 5 CHAIRPERSON SCHWALB: And so 6 notwithstanding that, thank you for your remarks. 7 And do you want to take a shot at the 8 question of worker compensation vis-a-vis the minimum 9 wage issue? 10 MS. NELSON: First of all, we have no one 11 working -- we do have commensurate wages, pay 12 commensurate wages. We have only service contracts 13 and we have no one employed at New Leaf who makes 14 less than the federal minimum wage. 15 I think that -- 16 CHAIRPERSON SCHWALB: So to clarify, there 17 are some who make more than federal minimum wage but 18 less than the full service contract wage -- 19 MS. NELSON: Right, right. 20 CHAIRPERSON SCHWALB: -- due to the 21 Commensurate Wage Application. Correct. 22 MR. MILLER: I have -- I'm an ex-school 78 1 teacher and I have, with board approval, began a 2 tenure program. I call it tenure for obvious 3 reasons. If you work at New Leaf for more than ten 4 years you don't make less than the Washington state 5 minimum wage, which right now is 7.67 an hour. So 6 that's a New Leaf policy. 7 We have two people who make less than that 8 who are given the Washington state minimum wage out 9 of our 100 employees. So we don't have anybody in 10 between the Washington minimum and the federal 11 minimum at this time. 12 CHAIRPERSON SCHWALB: Thank you. And you 13 may have already said this and I might have missed 14 it, what percentage of revenue would you say comes 15 from the JWOD Program? 16 MS. NELSON: Oh, ours, about 95. 17 CHAIRPERSON SCHWALB: Okay. 18 MS. NELSON: We are just about all JWOD. 19 CHAIRPERSON SCHWALB: Jim, did you have a 20 question? Start on that end this time. 21 THE REPORTER: Mr. Chairperson, could I 22 ask a favor? Could you ask speakers to give us their 79 1 notes if we can't -- 2 MS. NELSON: I did give my notes to Kim. 3 Um-hum, I did give them to Kim. 4 CHAIRPERSON SCHWALB: Andy? 5 MR. HOUGHTON: Yeah. You have 95 percent 6 of your revenue is JWOD. 7 MS. NELSON: Right. 8 MR. HOUGHTON: What percent of your, I 9 guess, programs are JWOD? Do you offer other 10 programs? 11 MS. NELSON: Well, we have vocational 12 rehabilitation from the state, but -- 13 MR. HOUGHTON: And of the number of 14 individuals that your organization serves, you said 15 there's 100 employed through JWOD. How many total do 16 you serve? 17 MS. NELSON: I guess it's just -- right 18 now in Washington state it's -- we just went through 19 kind of a bloodbath in VR and have very few 20 referrals. In 2004 New Leaf took in $6,000 from the 21 state for VR referrals because they stopped referring 22 people. 80 1 We're also mandated to go to CARF, and so 2 we are doing that so that we can continue to serve 3 the people on our island. We're the only CRP in 4 town. So there isn't very much other revenue. 5 What we're trying to do right now is 6 diversify some of our skilled people. Like I said, 7 we have the first grounds maintenance contract so we 8 have some pretty skilled people there. So we're 9 doing landscaping and grounds maintenance in the 10 community. We're also doing janitorial services in 11 the community. And our board has just really in the 12 last two years really started putting funds toward 13 that and advertising and doing that kind of thing. 14 But we're pretty much JWOD. 15 MR. OMVIG: Jim Omvig. Just a quick 16 question. Wouldn't want to discriminate against you, 17 so what is your total compensation? 18 MS. NELSON: My compensation is 79,000. 19 Plus I get the exact same health and welfare benefits 20 as every single employee. 21 DR. GRIZZARD: Yes, just one real quick 22 one because I don't want to belabor this from other 81 1 people coming to speak. But real quickly, you talked 2 about the bloodbath and the lack of referrals. Is 3 that an outgrowth of VR counselors not getting a 27 4 closure as a result of -- 5 MS. NELSON: No, it is not. 6 CHAIRPERSON SCHWALB: Thank you very much. 7 MS. NELSON: Thank you. 8 MS. ZEICH: The next speaker will be Mr. 9 Don Calcote. 10 MR. CALCOTE: Thank you for allowing me to 11 be here today. My name is Don Calcote and I'm an 12 independent member of the Board of Directors of the 13 Advocacy and Resources Corporation located in 14 Cookeville, Tennessee. 15 I'm also the President and CEO of one of 16 the fastest growing banks in Middle Tennessee. Along 17 with being a founding director of this bank five 18 years ago I've also been a commercial banker for 19 almost 30 years, involved in financing everything 20 from mom-and-pop crossroad stores to multi-national 21 manufacturing operations. 22 I've built my reputation as a banker in 82 1 knowing not only the science of business but the art 2 of business as well, what it takes to really make a 3 business run at its peak and how critical key 4 personnel are in this dynamic equation. 5 I'd like to use my time to address 6 employee compensation and fair market price 7 determinations. 8 Each not-for-profit model has different 9 management requirements based upon the complexity of 10 the company. In comparing NFPs it can never be a 11 simple comparison where you say one NFP is like any 12 other. And in comparing the majority of NFPs with 13 ARC it's important for me to point out that you're 14 not comparing apples and oranges. 15 For example, as a perfect example of the 16 art of business the Advocacy and Resources 17 Corporation doing business as ARC Diversified is a 18 self-supporting, multi-product manufacturing firm 19 with $60 million in annual revenues. It's managed by 20 a highly skilled, two-person executive management 21 team. 22 ARC has corporate divisions for product 83 1 development, packaging design, inventory control, 2 quality control, just-in-time distribution, detailed 3 costing and pricing, and futures-market analysis. 4 Additionally, under our corporate 5 umbrella, this executive team also manages subsidiary 6 companies that utilize the profits of ARC each year 7 in further helping their 240 handicapped employees 8 along with some 850 more special-needs people in our 9 community. Because of what ARC does and the way they 10 do it as a corporation, 1100 people are helped with 11 their housing, transportation, and health needs. 12 I speak as only one of ARC's independent 13 board members, but I do speak for all. The major 14 consideration and concerns that we have as board 15 members are that with the skill levels, years of 16 hard-won expertise, and the corporate and industry 17 wisdom held by our executive management team members, 18 they could easily be honeymooned away by any of the 19 large for-profit corporations, both in our area and 20 nationally. 21 I've gone on record in our last 22 compensation review that should they leave these 84 1 individuals would have to be replaced from the 2 private sector with compensation packages at an equal 3 or greater amount. 4 Based upon my 30 years of banking 5 experience, a acknowledgeable and worthy executive 6 team could not be found outside of the private sector 7 to run a company that is so diverse. This complex 8 company in this complex industry requires management 9 with complex skills, and these skills are not cheap. 10 If these individuals could not be 11 replaced, the people who will ultimately be affected 12 will be the handicapped employees and the people with 13 special needs who rely on the continued efficient 14 operations of ARC to provide for their livelihood. 15 To attempt to put these management 16 salaries in a direct ratio with a worker in the 17 production facility with or without severe 18 disabilities really makes no sense. There can be no 19 logical direct-linear correlation between a line 20 employee's salary and senior management's 21 compensation when the complexity of the executive 22 positions' responsibility is geometrically greater in 85 1 proportion. 2 The junior individual manages one process, 3 putting lids on cans, for instance. The senior 4 individual manages the junior employee along with 239 5 more performing multiple processes in multiple 6 companies along with the design, manufacture, 7 distribution, and pricing of those products. And 8 those products meet or exceed the exceptions of the 9 JWOD Program. A direct correlation is ludicrous, to 10 say the least. 11 When you as an individual go to the 12 grocery story to buy a bottle of ketchup you have a 13 fair market price in mind. You have a certain 14 quality in mind and you have a certain price 15 exception. 16 And say in my example you narrow it down 17 to Hunt's and Heinz. If the expected price was $2.40 18 and the Hunt's version was $14, you'd more than 19 likely would choose Heinz. If there were only 20 pennies difference your deciding factor would be 21 narrowed to your quality expectations based upon 22 personal taste and past history with the products. 86 1 There would be no other serious factors for 2 consideration and it would not matter at all how much 3 the CEO of each company made. Price and quality are 4 the only criteria. 5 I do not believe it is appropriate to 6 single or individual executive compensation packages 7 under any circumstances. NFPs are not publicly- 8 traded companies nor are they in most cases public 9 entities. Private NFPs are not state or federal 10 agencies and do not have the burden of the public 11 disclosure of personal information. 12 Highly compensated personnel already 13 report to their respective states and the IRS and 14 employees report via individual tax returns. States 15 through their divisions of municipal and state audit 16 or the equivalent have protocols for reporting 17 compiled financial information about wages as an 18 expense factor. 19 Should the Committee feel compelled to 20 scrutinize all agency wages as a factor of conducting 21 the business of JWOD beyond that which is 22 accomplished through annual audits, it might be 87 1 appropriate to ask for compiled information about 2 total agency wages on the Fm 404. Value judgments 3 about such information are best left to the board of 4 directors, to the attorney generals of the individual 5 states, or to the IRS. 6 Thank you for allowing me to testify. 7 CHAIRPERSON SCHWALB: Did you want to just 8 take -- I know you're not the CEO, but as a board 9 member did you want to address the issue of minimum 10 wage for workers at all? 11 MR. CALCOTE: I agree wholeheartedly that 12 you should pay minimum wage, but from my past 13 experience not only in banking but also as an 14 accountant, I spent some time as a cost analysis for 15 manufacturers, and one of the problems that you have 16 is if you have two individuals side by side and one's 17 working at a hundred percent efficiency making $7,00 18 an hour and the person right next to that person is 19 working at 25 percent, then usually what you have is 20 an efficiency problem with the 100 percent because 21 he'll start cutting his productivi