Executive Compensation at the Association of American Railroads

The Association of American Railroads (AAR) is an industry trade organization representing freight railroads, Amtrak, and other commuter railroads in the US, Canada, and Mexico, to Congress and government regulators, and the public.  Based in Washington, DC, AAR is a tax-exempt, non-profit 501 (c) 6 with 14 voting members (directors), 13 of whom are independent, in its governing body, although the most recent Form 990 (2019) lists 15 directors, all of whom are male.

In 2019, AAR reported total revenue of $54 million (compared to $53 million in 2018, $60 million in 2017, and $60 million in 2016), most of which comes from membership dues.  Expenses totaled $54 million in 2019 with the three largest expenses reported to be compensation ($19 million), intracompany expenses – 3 tax exempt related organizations at the same address and 2 related organizations taxed as a corporation or trust – ($14 million), and fees for services – primarily consultants – ($11 million).

86 employees received $19 million in compensation, which equates to an average compensation of $221,000.  However, only 49 (57%) of the employees received more than $100,000 in compensation. The 14 most highly compensated employees are reported to be:

• $1,478,953:  Edward R Hamberger, President, CEO and Director (thru 4/2019)
• $1,286,053:  Ian N Jefferies, President, CEO and Director
• $  718,776:  Jeffrey D Marsh, SVP, Finance, and CFO
• $  672,169:  Kathy D Kirmayer, SVP, Law and General Counsel
• $  626,091:  Michael J Rush, SVP, Safety and Operations
• $  618,198:  John T Gray, SVP, Policy and Economics
• $  452,495:  Kristin A Smith, SVP, Communications
• $  438,021:  Andrian Anarkis, SVP, Government Affairs
• $  392,790:  William C Thompson, Program Manager
• $  390,843:  Daniel Saphire, Associate General Counsel
• $  350,196:  Kelley French Donley, AVP, Member Services
• $  330,364:  Timothy J Strafford, Corporate Secretary
• $  328,751:  Jennifer MacDonald, AVP, Government Affairs
• $  311,595:  Robert E Fronczak, AVP, Enviroment/Hazmat

The 14 most highly compensated employees received $8.5 million in compensation, or 45% of total compensation paid to all employees, which means 72 employees received $10.5 million in compensation (or an average of $146,000).  Only 37 employees received less than $100,000 so if those 37 employees received $99,000 each, then they received $3.7 million which means the other 35 employees received $6.8 million or an average of $194,000 each.

AAR provided a housing allowance ($14,272 to William Thompson) and social club dues ($5,980 for Edward Hamberger and $9,663 for Ian Jefferies and $600 for William Thompson).

AAR also paid $1 million to Edward Hamberger and $144,386 to Michael Rush per a “retention and stay agreement.”  Jeffrey D Marsh participated in a “retention and stay agreement” in the amount of $170,667.

In summary, a significant amount of revenue ($30 million) is spent on employee compensation and fees to outside vendors.

32 independent contractors received more than $100,000 in compensation in 2019 with the five (5) highest reported to be:

• $14.4 million:  Transportation Technology Center, Inc., of Pueblo, CO for testing and research (note: this org is owned by AAR)
• $ 4.6 million:  Subject Water, of Washington, DC for paid media consulting and advertising
• $ 0.9 million:  Gibson Dunn and Crutcher, LLP, of Washington, DC for legal consulting
• $ 0.6 million:  ARINC, of Annapolis, MD, for engineering consulting
• $ 0.6 million:  Compass Lexicon, of Boston, MA for economic consulting

Finally, it is important to point out the AAR is in a negative net asset position (-$13.6 million as of year-end 2019).

To read the IRS Form 990 (2019), click here.