Executive Compensation at Rotary International

Rotary International (RI) is a 501 (c) (4) – a social welfare organization that oversees 32,000 Rotary International Club organizations – based in Evanston, Illinois. Governed by a 20-member board (the president, president-elect, general secretary who is also the CEO, and 17 Rotary Zone Directors), Rotary International reported having 330 employees who were compensated $34.3 million which equates to an average compensation of $104,000. However, only 60 individuals received more than $100,000 in compensation with the 14 most highly compensated individuals listed below:

• $507,638:  John Hewko, General Secretary ($324,888 from RI and $182,750 from RF)
• $280,627:  Michelle Berg, Deputy Gen Secty ($179,602 from RI and $101,025 from RF)
• $275,167:  Peter Markos, Chief Info Officer thru 3/17 ($156,845 from RI and $118,322 from RF)
• $253,233:  James Barnes, Chief Program/Mem Officer ($194,989 from RI and $58,244 from RF)
• $251,252:  Lori Carlson, CFO ($130,652 from RI and $120,602 from RF)
• $227,526:  David Alexander, CCO ($195,672 from RI and $31,854 from RF)
• $226,880:  Steven Routberg, Gen Counsel ($186,042 from RI and $40,838 from RF)
• $186,498:  Bernadette Knight, Sr Dir Finance ($96,979 from RI and $89,519 from RF)
• $177,457:  David Stumpf, Dir of Aud Svcs ($86,511 from RI and $90,946 from RF)
• $176,346:  Andrew McDonald, Deputy Gen Counsel ($118,152 from RI and $58,194 from RF)
• $174,847:  Matthew Switzer, Global Dir of HR ($99,663 from RI and $75,184 from RF)
• $159,662:  Celso Fontanelli, Office Mgr Brazil ($75,041 from RI and $84,621 from RF)
• $125,826:  Joe Brownlee, former key employee ($65,429 from RI and $60,397 from RF)
• $109,377:  John Osterlund, former key employee ($4,376 from RI and $105,001 from RF)

It is important to point out that all of the highly compensated individuals listed above receive compensation from more than one Rotary organization. Although the IRS Form 990 does not specify which other Rotary organization, it appears to be the RF because the same executives are listed on RF’s most highly compensated individuals and the numbers match.  To look at just the compensation from RI would be missing the big picture because the total compensation each individual is receiving from both RI and RF (since they operate out of the same address) presents a more accurate reporting of compensation.

Also, of the 14 individuals listed above, 11 were male (79%) while 3 were female (21%).

The IRS Form 990 also reports RI paid for:

• First Class or Charter Travel
• Travel for Companions
• Tax Indemnification and Gross-up Payments
• Housing Allowance or the use of a Private Residence
• Health or Social Club Dues or Initiation Fees
• Personal Services (such as maid, chauffeur, chef)

Notes indicate business and first class travel were paid for the Board of Directors and the General Secretary.

A private residence is provided to the RI President and President Elect near the RI headquarters in Evanston, Illinois.

Travel for spouses is provided for business purposes.

RI pays the taxes associated with income from health insurance, expenses from the residences, etc.

Expenses for the President and President Elect related to club memberships is paid for by RI.

Personal services are provided to the President and President Elect.

The IRS Form 990 also reports the 5 highest paid independent contractors were:

• $1.8 million to Cheil Worldwide of Seoul, Korea for stage production
• $1.7 million to Kim S Travel Services of Seoul, Korea for travel services
• $1.1 million to PICo North Asia Ltd of Seoul, Korea for convention decorations
• $650,000 to Conferene Systems, Inc. of Schiiller Park, Illinois for interpretation equipment
• $640,000 to Kintex of Korea for catering services.

RI also paid $9.1 million to District Governors (this info was reported as a non-compensation expense on the income statement). There are 529 District Governors which if equally distributed means each District Governor received $17,200.

Summary

In summary, Rotary International – the oversight organization – received nearly $100 million in funding primarily from members through the Rotary clubs and member donations. The executives receive generous compensation packages from RI (and a related Rotary organization) and generous perks. In addition, $9 million is paid to the 529 District Governors which is not classified as compensation for employees on RI’s IRS 990.

In general, it seems the hierarchy of Rotary is generously taken care of primarily through the membership fees and donations of Rotary members.  In addition, it is important to note Rotary International and Rotary Foundation operate out of the same address, with each organization paying a portion of the most highly compensated individuals.  Collectively, these two organizations employed 611 individuals in 2017 and compensated 105 more than $100,000 with the most highly compensated individual being John Hewko. Both organizations also paid for first class travel and travel for companions.  With most of the funding of these organizations coming from rotarians, it appears that the members support a large support staff with well compensated employees, many of whom are provided first or business class travel as well as travel for their companions (for business purposes).

It is also important to point out 4 out of 5 of the most highly compensated independent contractors are in Korea. Given that about 90% of grants and assistance ($207 million out of $230 million) are to foreign organizations, this is an interesting observation.

To read and review the IRS Form 990 (2016 for the year ending June 30, 2017), click here.