The CEO of Goodwill Omaha resigned Friday in the wake of a World-Herald investigation showing that the charity’s top-dollar executive pay has consumed the profits of its signature thrift stores, leaving scant dollars for programs to help disabled and needy job-seekers.
Frank McGree, the 64-year-old who led the Omaha charity for 30 years, announced Friday that he was resigning and taking early retirement. After accepting McGree’s resignation, the volunteer board of trustees said it’s now focused on revising the rest of the management structure in a way that best serves the charity’s mission.
“We certainly have taken seriously all the stories that have come out this week and the comments in the community,” board Chairman Joe Lempka said. “We don’t have all the answers right now. ... We have work to do.”
McGree’s departure was surely welcomed by donors upset by revelations of the charity’s profit-driven culture and big spending on executive pay. But one prominent donor also stressed that Friday was just a first step for Goodwill.
Andy Davis of the Dr. C.C. and Mabel L. Criss Memorial Foundation, a longtime major Goodwill donor that had pulled its support from the charity this week, said there are a number of things that the public still needs to see from Goodwill going forward.
The board needs to show that the charity has refocused on its mission of helping those with challenges to employment, he said. There needs to be an accounting of how executive salaries became so bloated in the first place. And the board needs to show that the proceeds from its thrift stores are no longer being used to support such excessive pay but are going toward Goodwill’s mission.
“It’s a step in the right direction, but the departure of Frank McGree does not completely solve the problem,” Davis said. “There needs to be a higher level of accountability and a culture change at Goodwill.”
Lempka would not discuss the terms of McGree’s departure, including whether he will be due any retirement payments from the charity. Lempka and board member R.J. Neary said the board wasn’t at liberty at the moment to speak to such personnel matters. “We want to get to a point of transparency here, but we can’t talk about that right now,” Neary said.
The board has tapped Pauli Bishop, a nine-year Goodwill Omaha veteran and its chief financial officer, to serve as its interim chief executive.
By Friday night, McGree’s name and photo had already been removed from the nonprofit’s website.
Anne Hindery, CEO of the Nonprofit Association of the Midlands, said job one for Bishop and the board is clear: to restore the charity’s badly damaged trust. Not only trust among the many Goodwill donors angered that their contributions have been squandered, but with employees, clients and the broader Omaha community, she said.
“They need someone to come in with fresh eyes, do an analysis of the situation and determine what needs to be done to right the ship,” she said.
In spite of Goodwill’s slogan that shopping at or donating to its thrift stores helps needy job seekers, The World-Herald’s investigation published this week found that in Omaha such efforts contribute more to executive salaries.
Of about $4 million in profits generated by Goodwill’s thrift stores last year, only $557,000 found its way into its job programs, with the vast majority of program funding instead coming from outside grants and contracts. The rest of the thrift profits were gobbled up by the agency’s overhead expenses, including much executive pay.
McGree and his eight top managers last year received $1.8 million in total compensation. In all, 14 executives and managers were paid $100,000 or more, including McGree’s daughter and the daughter-in-law of a board member.
McGree received a corporate-style pay package exceeding $400,000 annually, including $100,000 annual performance bonuses and a country club membership. A $519,000 retention bonus awarded to him by the charity’s board in 2014 brought his pay in that year close to $1 million.
McGree’s pay far exceeded that of the leaders of other major social service nonprofits in Omaha. And a World-Herald analysis found that none of the nation’s 78 largest Goodwill affiliates could match Goodwill Omaha in the percentage of budget that it devoted to CEO pay or, for its size, in the number of executives paid six-figure salaries.
Meanwhile, rank-and-file employees received relatively low wages as social workers, store managers and clerks. The charity additionally employed dozens of disabled workers at less than minimum wage, which is legal under a controversial federal law.
The paper also found that the charity had made money by having workers repackage Chinese-made hair rollers into bags marked “Made in America.” And former job trainers who worked with disabled students spoke of their frustration in getting the charity to hire graduates in Goodwill’s profit-driven thrift stores.
The World-Herald’s investigation caused a storm of protest, with several major donors saying they had given their last dollar to Goodwill. Similarly, dozens of Omahans told the paper — and likely Goodwill directly — that in the future they would be taking their donations of household goods elsewhere.
After McGree and Goodwill’s board for two months had refused to answer the newspaper’s questions, McGree released a lengthy statement Wednesday. In it, he declared that the charity’s executive pay was fair and deserved, and he defended the employment of close relatives within Goodwill’s upper ranks.
He called Goodwill one of the nation’s best charities even as he affirmed many of the major conclusions of The World-Herald’s investigation — including that the charity’s management expenses largely consumed its thrift-store profits.
Susie Buffett, whose Sherwood Foundation earlier this year gave Goodwill $140,000 to support a youth employment program, blasted McGree’s statement and said she would “never give another penny” to Goodwill.
Two other major institutional funders of Goodwill, the Criss Foundation and the Richard Brooke Foundation, both told The World-Herald in recent days that they were ceasing future contributions to the charity, as well.
McGree’s departure probably won’t be the only major change within Goodwill’s executive staff.
The charity continues to have a management structure that is consuming much of the charity’s assets. The World-Herald had compared Goodwill Omaha to like-size Goodwills in Kansas City and Iowa City, finding that they, respectively, had one and two employees paid $100,000 or more. The disparity was a big reason the Iowa City charity was able to put $2.3 million of its store profits into its mission programs for the disabled and needy — four times more than Goodwill Omaha.
Lempka and Neary said the board and Bishop will now be diving into such issues, making sure all policies and practices are right for the organization. There probably are other problems that the board isn’t even aware of yet, they said, problems that probably will come out as the board and Bishop engage with Goodwill’s front-line employees.
Those workers remain one of the charity’s key strengths as Goodwill moves forward, Lempka said. “We have a lot of good folks who are ready to get on with the mission.”
Hindery, of Nonprofit Association of the Midlands, said The World-Herald’s investigation and the mistakes made by Goodwill have been the talk of nonprofit circles this week — not only in Omaha, but nationally.
But while there are many challenges ahead for Goodwill’s board, she said that with the right actions and commitment, it can repair the damage and even come back stronger and more mission-focused.
“It’s a part of the human condition that no one goes through life unscathed,” Hindery said. “It’s how you deal with it.”
One challenge for Goodwill will be winning back the everyday donors, those whose contributions of no-longer-needed clothing or household goods are the key to Goodwill’s charitable model.
Theresa Johnson of Omaha is part of an organization that runs an annual used-clothing drive for needy families in the Elkhorn school district. In the past, those behind the drive would donate the unclaimed leftovers to Goodwill. That didn’t happen last weekend after this year’s event. They took the clothes to other charities, she said.
While saddened to see how Goodwill was being run behind the scenes, Johnson said she thinks that the public would support Goodwill in the future if its leaders show it has become “a leaner, meaner organization.”
If Goodwill becomes true to its mission, she said, its stores and job training programs can provide a big boost for Omahans who need help becoming employable.
“We have to show compassion to Goodwill, too,” Johnson said. “If they make these changes, how much better would it be for our city and our state?”