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September 22, 2003
United Way Changes Pension Rules After $1.5M Payout

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In the wake of a controversial $1.5 million pension payout to a former chief executive, the United Way of America is changing its rules to prevent such payments from happening again.

The CEO, Betty Stanley Beene, had served in the post from late 1997 to 2001. The $1.5 million payment was disclosed in recent United Way tax filings, according to the Washington Post.

United Way officials have defended the payment as appropriate, with current CEO Brian A. Gallagher telling the Post that its size was based on Beene's salary and years of service in the United Way system, including 12 years at local United Way organizations and 15 years at the Girl Scouts, a United Way-affiliated agency.

And before approving the payment, Gallagher added, the organization's board commissioned an HR consultant to compare it to retirement payouts made by other nonprofit groups of comparable size. The consultant also analyzed whether the payment met Internal Revenue Service standards on compensation for nonprofit executives. The consultant concluded that the payment was fair, Gallagher said.

Still, the board has since changed the pension plan to prohibit such payouts in the future. "Not because we didn't think it was reasonable," Gallagher told the Post, but because "the environment is different," and executive compensation at businesses and nonprofit organizations is viewed more critically.

Under the new arrangement, United Way of America employees will not be allowed lump-sum payments but must receive their pensions in monthly installments. They also will not be able to include years of service at United Way agencies when calculating their pensions, Gallagher told the newspaper.

The Post noted that the United Way has run into controversy before concerning the payments to departing executives - including former President Elaine L. Chao, who is now secretary of the U.S. Labor Department.

When Chao left the charity in 1996, after leading it for four years, she was offered $292,500 - to be paid privately by half a dozen directors on the board. But when the deal came to light, Chao turned it down, saying it was bringing "unjustified" criticism to the organization, according to the Post.

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