Executive Compensation at Dairy Management (2021)

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” the includes paying some employees up to $2.7 million annually.

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 dairy industry.

The most recent IRS Form 990 available (2021) shows that DMI raised $154 million (compared to $161 million in 2020, $156 million in 2019, $160 million in 2018 and $155 million in 2017 – so revenue appears to be stable). Expenses totaled $154 million (historically, expenses have matched revenue) with the two largest expenses domestic marketing ($88 million) and compensation ($33 million) for the 306 employees.  The average compensation per employee was $108,000.

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

• $2,680,255:  Thomas Gallagher, CEO
• $  804,571:  Barbara O’Brien, President
• $  588,886:  Gregory D Miller, EVP
• $  566,438:  Elizabeth A Engelmann, EVP
• $  529,813:  Krysta Laverne Harden, EVP
• $  471,634:  Quinton D Baily, CFO
• $  444,883;  Harper Caleb, EVP
• $  434,341:  Jean H Ragalie-Carr, EVP

As illustrated above, the 8 most highly compensated employees received $6.5 million in compensation in 2021.  3 of the 8 (38%) most highly compensated employees are male while 5 (or 62%) are female. The most highly compensated employee was Thomas Gallagher, the CEO who received $2.7 million in 2021 and received $9 million in compensation over the past 7 years. 7 of the 8 most highly compensated employees received $27 million in compensation (note:  in previous years there were other highly compensated employees who left the organization including a Thomas Suber, an EVP who received $1.9 million in compensation in 2015):

Thomas Gallagher:  Total Compensation 2015-2021:  $9 million

• 2021:  $2,680,255
• 2020:  $  912,642
• 2019:  $  887,930
• 2018:  $  875,930
• 2017:  $  899,810
• 2016:  $1,011,379
• 2015:  $1,361,753

Barbara O’Brien:  Total Compensation 2015-2021: $4.5 million 

• 2021:  $804,571
• 2020:  $648,355
• 2019:  $646,204
• 2018:  $654,451
• 2017:  $649,419
• 2016:  $591,494
• 2015:  $540,585

Gregory Miller:  Total Compensation:  2015-2021:  $5 million 

• 2021:  $  588,886
• 2020:  $  579,296
• 2019:  $  559,656
• 2018:  $  639,651
• 2017:  $1,546,760
• 2016:  $  579,665
• 2015:  $  656,411

Elizabeth Engelmann:  Total Compensation:  2017-2021:  $2.5 million 

• 2021:  $566,438
• 2020:  $536,660
• 2019:  $522,055
• 2018:  $532,869
• 2017:  $478.809

Jean H Ragalie-Carr:  Total Compensation:  2017-2021:  $3 million

• 2021:  $434,341
• 2020:  $501,961
• 2019:  $482,610
• 2018:  $494,641
• 2017:  $857,405

Quinton D Baily:  Total Compensation:  2017-2021:   $2 million 

• 2021:  $471,634
• 2020:  $420,437
• 2019:  $365,084
• 2018:  $370,733
• 2017:  $246,542

Krysta Laverne Harden:  Total Compensation:  2020-2021  $1 million

• 2021:  $529,813
• 2020:  $419,586

With regards to compensation, it is interesting to note:

• 306 employees received $33 million in compensation.
• 151 of the 306 employees received more than $100,000 while 155 received less than $100,000.
• The 8 most highly compensated employees received $6.5 million so the remaining 298 employees received $26.5 million.  143 of the 298 employees received more than $100,000 while 155 employees received less than $100,000.  Since the 143 employees could not receive more than $14.3 million, the 155 employees received at least $12.2 million (or an average of $79,000).

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

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

• $6.6 million:  NFL Properties LLC of New York, New York for promotion
• $6.2 million:  Mischief Inc, of Brooklyn, NY for “agency services” (ADV)
• $5.3 million:  Daniel J Edelman, Inc. of Chicago, IL for “agency services” (PR)
• $ 3.6  million:  Domino’s National Advertising Fund, of Ann Arbor, MI for promotion
• $2.5 million:  Lake States Dairy Center, of Fair Oaks, IN for promotion

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 using more than 300 employees working to increase the public’s use of milk. DMI employees are well compensated with the average compensation per employee more than $100,000 and the 8 most highly compensated employees receiving $6.5 million in 2021. 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?  And, I wonder how dairy farmers would feel about the compensation packages, first class travel, companion travel, and health and social club dues or initiation fees?

To read the IRS Form 990 (2021), click here.