Executive Compensation at Dairy Management Inc (DMI) 2019

Dairy Management Inc (DMI) is the big organization that most people haven’t heard of because unless you’re a dairy producer, work in the dairy industry, or work in the corporate offices of Pizza Hut, Taco Bell, Dominoe’s, or KFC, you would have no reason to know that this non-profit, tax-exempt 501 (c) (6) is the most powerful non-profit dairy organization in the country.

Considered a “check-off” program authorized by Congress but responsible to their members, DMI’s mission is to increase consumption of dairy products by finding more ways to get dairy products to the public including assisting fast food companies with menu items.

How does DMI do this? By requiring America’s 37,000 plus dairy producers to pay 15 cents (and dairy importers to pay 7.5 cents) for every 100 pounds of milk (a gallon of milk weighs 8.6-11.6 pounds so 100 pounds of milk is roughly 10 gallons, meaning US dairy farmers pay DMI about 1.5 cents per gallon for their services).  These funds are used to “fund programs and aimed at promoting dairy consumption and protecting the good image of dairy farmer, dairy products, and the dairy industry.”

What they don’t tell you is that in order to produce milk for human consumption, the cows have to be pregnant (primarily by artificial insemination) or given birth to a calf, who is taken away from the mother to either be grown to become a dairy cow (females) or slaughtered at a few months old for veal (males) or raised as a beef cow. Those images of the happy cows in the fields by a barn are simply not the truth for most cows in the industrialized milk industry.

The most recent IRS Form 990 available (2019) shows that DMI raised $156 million in 2019 (compared to $160 million in 2018 and $155 million in 2017). Expenses totaled $156 million with the two largest expenses domestic marketing ($79 million) and compensation ($29 million) for the 307 employees.  The average compensation per employee was $95,000.

139 employees received more than $100,000 in compensation.  The 8 most highly compensated employees were reported to be:

• $902,895:  Thomas J Vilsack, EVP
• $887,930:  Thomas Gallagher, CEO
• $646,204:  Barbara O’Brien, President
• $559,656:  Gregory D Miller, EVP
• $487,138:  Mark A Leitner, EVP
• $522,055:  Elizabeth A Engelmann, EVP
• $482,610:  Jean H Ragalie-Carr, EVP
• $365,084:  Quinton D Baily, CFO

As illustrated above, the 8 most highly compensated employees received $5 million in compensation.  5 of the 8 (63%) most highly compensated employees are male while 3 (or 37%) are female. The two most highly compensated employees were Thomas Vilsack, an EVP and Thomas Gallagher, the CEO. Mr. Gallagher has received $5 million in compensation over the past 5 years while Mr. Vilsak has received each received more than $4 million in compensation in the last 3 years:

Thomas Gallagher

• 2019  $  887,930
• 2018:  $ 875,930
• 2017:  $  899,810
• 2016:  $1,011,379
• 2015:  $1,361,753

Thomas J Vilsack

• 2019:  $902,895
• 2018:  $999,421
• 2017:  $800,557

The IRS Form 990 also reports DMI paid for first class travel, health or social club dues or initiation fees, and tax indemnification and gross up payments.  See Schedule J (link is below) for more detail on these expenses.

It is also important to note DMI operates out of an office in Rosemont, Illinois in which the following organizations also operate out of:

• United Dairy Industry Association, a 501 (c) (6)
• National Dairy Council, a 501 (c) (3) controlled by United Dairy Industry Association
• Innovation Center for US Dairy, a 501 (c) (6) controlled by DMI
• Dairy Research Institute, a 501 (c) (3) controlled by DMI

109 independent contractors received more than $100,000 with the 5 highest listed below:

• $16.1 million:  Daniel J Edelman, Inc. of Chicago, IL for “agency services” (PR)
• $ 6.0 million:  NFL Properties LLC of New York, New York for promotion
• $ 5.8  million:  Domino’s National Advertising Fund, of Ann Arbor, MI for promotion
• $3.0 million:  Darigold, Inc., of Chicago, IL for promotion
• $2.5 million:  Lake States Dairy Center, Inc., of Fair Oaks, IN for promotion (a related org)

In summary, dairy producers in the United States are required to pay 15 cents per 100 pounds of milk (or about 1.5 cents per gallon) adding up to $160 million annually to DMI who works to increase demand for milk products, primarily through advertising and more than 300 employees working to increase the public’s use of milk. DMI employees are well compensated with the average compensation per employee nearly $100,000 and the 8 most highly compensated employees receiving $5 million in 2019. In addition, DMI paid for first class air travel, health or social club dues or initiation fees, and tax indemnification and gross up payments.

The question arises:  Why is the government involved in a check-off program forcing milk producers to contribute to an advertising and promotion campaign (that includes providing high compensation packages to many employees, first class travel, and other perks) instead of allowing free market choices in this industry?

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