Wikipedia:Wikipedia Signpost/2016-05-28/Special report

The Wikimedia Foundation last week released its 990 tax form for 2014–15, which revealed a major surprise: after her departure as executive director in mid-2014, Sue Gardner was still one of the foundation's two highest-paid employees, with total compensation for her role as a "special advisor" amounting to US$320,057. This is over $100,000 more than the $218,529 total indicated on page 48 of the tax form for the previous year.

While the tax form reports that Ms Gardner's base compensation dropped from $200,000 in 2013–14 to $112,500 in 2014–15, "other reportable compensation" increased from $1,685 in 2013–14 to $188,841 in 2014–15, resulting in an overall increase in Ms Gardner's compensation of almost 50 percent.

The Signpost sent the following questions to the chair of the WMF board, Patricio Lorente, and chief financial officer Jaime Villagomez:

In the WMF's recently released public inspection copy of its return to the IRS for 2014–15, we note that on page 9 the former ED Sue Gardner is listed as "special advisor" at an average of 40 hours per week, with total compensation of US$301,341, with an additional $18,716, for a total of $320,057). On page 52, this compensation is broken down into $112,500 base, $188,841 other, $10,400 retirement etc, and $8,316 expenses.

We presume that this average was for the full financial year 1 July 2014 – 30 June 2015; that is, involving some 2000 hours of labor input.

According to the document, Ms Gardner's compensation and labor input as "special advisor" are considerable during that financial year. We wonder whether you might respond to these related questions:

(1) Given that in purely financial terms there were the equivalent of two full-time CEOs on the payroll, what were the inputs to and benefits for the Foundation in return for this charge to the budget?

(2) Is Ms Gardner still on the payroll (her LinkedIn page states that she is), and does she currently play an advisory role to anyone in WMF management?

(3) In terms of transparency in management and governance, would it have been preferable to disclose the arrangements with Ms Gardner to the Wikimedia community at the time they were finalized rather than nearly two years later?

Mr Villagomez only replied to refer us to the chair, who responded as follows:

In May 2014, Jan-Bart announced that Sue would stay on as a special advisor,[1] which he confirmed again in June that year.[2]

The Board felt that her knowledge and experience in our movement was valuable to support the Foundation as it went through that ED transition. In general, it is good practice to make sure that there is the ability to draw on the expertise of an experienced former executive—in this case, someone who grew the organization from a few people to more than 200.

Here are a few things we wanted to ensure:

• Sue’s counsel for the new ED. We did not know what kinds of counsel the new ED would need, but it seemed reasonable to us that the new ED would benefit from ongoing time with Sue to talk over issues as they arose.
• Her engagement during the handover period, so that she would have time to engage deeply when and if that was necessary. If the new ED needed a briefing on the context for the creation of the FDC, or other initiatives Sue had pioneered in the organization, or similar, we wanted Sue to have the ability to carve out real time for that, possibly including on short , but notice sic.
• Sue's counsel for the Board as we oriented and evaluated the new ED. It is the Board's job to manage the executive director, but Sue's experience gave her unique insight into the role and its requirements, and we wanted to be able to call on her when and if we thought it was necessary.
• Sue's time so that she could dedicate some energy to generally staying aware of how the Foundation was doing, and was therefore equipped to help to support its continued success. For example, if the Board was struggling with an ongoing issue such as something related to paid editing or a media controversy, we wanted her reasonably up-to-speed so she could help us if necessary.
• Lastly, Sue's time so she could help internally in small ways as needed. A senior staffer might need her to dig a document out of her files. Somebody might need her to help reconstruct how revenue targets had been developed in the past. There might be a piece of the annual planning process that wasn't well documented and needed to be explained. We wanted her to be available in the event we had quick questions or needed information that was known only by her, or was easiest to get from her.

We felt this was an important leadership change, perhaps one of the bigger ones in the Foundation’s history. This wasn't "two EDs"—Sue maintained operational distance and offered guidance as requested. This was a practical means of ensuring the handover went as smoothly as possible, and key institutional knowledge was preserved during an important period of transition.

Sue agreed to serve as Special Advisor to the Foundation for a term of one year after she stepped down. In June of 2015, the Foundation extended Sue's term as Special Advisor, through May 31, 2016, to continue her guidance and support of the Board and the Foundation. The Foundation regularly reports on executive compensation through the 990 disclosures, but we generally have not shared that information in other venues.

Jan-Bart and I reached out to her on a number of occasions, and she reached out to us. We, not Sue, are responsible for the decisions we've made and the actions we've taken. But we've been grateful for her considered input, even when we've disagreed with it or taken a path different from what she recommended.

I and the rest of the Board appreciate Sue’s long-time commitment to Wikimedia, and her continuing support to the Wikimedia Foundation.

As these were rationales for creating Ms Gardner's special advisor role rather than descriptions of actual work performed, we then asked for some concrete examples of what Ms Gardner had done in the financial year. Mr Lorente responded:

Among others, I can recall:

• Sue designed and executed the handover process. She had prepared a handover book of orientation materials and had several multi-day offsite meetings briefing Lila on the organisation, its history, structure, operations, financials, guiding principles, etc.
• In the first months following her departure, Sue carried out some remaining transition obligations for the organisation. For example, she attended Wikimania and participated in media, including the 60 Minutes documentary.
• During Lila's tenure, Sue met with Lila regularly, and briefed her and advised her as requested.
• Sue dug up files and created briefing documents for Lila and others as requested.
• Sue has acted as a sounding board and advisor to senior staff on a number of issues over the past few years, both before and following Lila's departure. Some of this work has been quite sensitive as you can imagine: we've been grateful for her good judgment and constructive approach, in what has been a difficult time for the organisation.
• Sue has acted as an ambassador and evangelist for Wikimedia. She has been a supportive external advocate on behalf of the Wikimedia Foundation and Wikipedia, since leaving the organisation.
• Sue has acted as an advisor to the board. As I said before, Jan-Bart and I reached out to her on a number of occasions, and she had reached out to us.

We leave it to the community to judge whether these responses are satisfactory, and whether this activity justifies an apparent $100,000 increase in Ms Gardner's compensation over what she received as a full-time executive director.

According to the 2014–15 tax form, the Foundation also paid two law firms in excess of $1.9 million for undisclosed "legal services" (p. 61). This is more than four times the total for the previous year (p. 57 in last year's report). On the Wikimedia-l mailing list, WMF communications strategist Gregory Varnum indicated that a significant portion of these expenses went toward efforts to strengthen the Foundation's trademark portfolio:

As our global reach has grown over time, we felt it was important to strengthen the trademark portfolio and solidify the protection of Wikimedia’s marks globally. In December 2013, we began working with Jones Day on our global trademark filings, registrations, and oppositions. During the 2014–2015 fiscal year we filed 1,500+ new trademark applications for 35 different trademarks in 100+ countries. A significant portion of the legal services expenses in 2014–2015 went toward the mandatory government trademark application filing fees.

These new trademark applications contained expanded coverage and revised descriptions to ensure better protection of Wikimedia's marks and projects, including countries where readership was growing through targeted programs or distribution (such as Wikipedia Zero and mobile readership). Going forward, we anticipate (and are beginning to realize) a decrease in trademark expenses year over year, now that we have this initial foundation is in place. This investment immediately benefits Wikimedia and its communities by ensuring that our trademark portfolio reflects the maturity and breadth of the Wikimedia movement, and protects us against certain forms of infringement or misuse.

Tony1 assisted in the preparation of this story.

Update (June 9, 2016)

In response to ongoing questions from Wikipedia volunteers, Wikimedia Foundation chair Patricio Lorente provided an additional explanation to the community on June 8, 2016, in an email to the Wikimedia-l mailing list. This is quoted here in full:

Hi all,

We’ve heard your questions and want to address them broadly, as well as provide more information about the breakdown of Sue’s compensation during this time. We understand the confusion related to this recent 990, given the period it covers, and the aggregate amounts it reports. Below you’ll find additional information about the nature of our contract with Sue, the timeframe, and her work and compensation. I expect this will help resolve this conversation. As Chair, I am completely comfortable with all terms. Sue was a great ED and brought real value in exchange for her compensation.

==

Background

In re-reading Jan-Bart’s original email [1] where he stated that Sue was staying on as an advisor, it isn’t explicit that this was a paid position. We should have been more clear on this point. It is understandable that people wonder why Sue was not listed on the page of staff and contractors. However, everyone listed on the staff and contractors page report up to the ED. Sue did not report to the ED; she was accountable to the board chair. That's why she was not on that page.

On the issue of compensation: We handled Sue's compensation the same way we do with other individuals: it is disclosed in the 990 as appropriate, and not elsewhere. That's our normal practice. This is true for a variety of reasons, including the fact that the results are certified through our external auditors. Other reasons include that it is a transparent mechanism, consistent with other large charitable organizations, and a matter of permanent, public record. The Foundation also wouldn’t normally announce the salary or contract compensation at the time of bringing someone on; that includes special advisors.

We also don’t usually share the specific details of people’s compensation beyond what is published in the 990. However, the 990 can be confusing, especially when compensation levels change mid-year, and so in this case we (including Sue) are happy to clarify the specifics.

Timeframe

One point of confusion is for the period this compensation covers. This is reasonable, this confused even some of us involved in preparing this response. Although the majority of activities reported on the Form 990 cover the Foundation’s fiscal year (specifically, the six months between July 1, 2014 - June 30, 2015), the IRS requires that details about compensation for certain highly-paid individuals are for the full calendar year in which the fiscal year begins or ends. So all the executive compensation reported is for twelve months, from January - December 2014, even though some of it it falls outside the fiscal year reporting (July 1, 2014 - June 30, 2015).

Since Sue was on payroll during the 2014 calendar year, this means that the 990 contains her total compensation for the whole year, includes Executive Director salary, bonus, and special advisor work, at differing levels throughout that period.

Total compensation

The total compensation ($301,341) reported in the 2014 990 form is broken into three areas:

(1) Compensation for her role as Executive Director during the 2014 calendar year (January 1 - May 31 2014): $107,174

This number is Sue’s regular compensation as full-time Executive Director, before the appointment of the new ED. This is for the 2014 calendar year period of January 1 - May 31, 2014. It does not include compensation for any of her efforts following May 31, 2014.

(2) Retention bonus to compensate Sue for lost opportunities during the transition period: $165,000.

Sue informed us of her intent to step down in March of 2013, but agreed to stay on until a new ED was identified. In August 2013, the Board of Trustees approved a one-time retention bonus to compensate Sue for lost opportunities and for her willingness to remain with the Foundation during an important transitional period. Sue continued to serve as Executive Director for more than a year after announcing her resignation, even though she could have sought opportunities elsewhere. In addition to her other ED responsibilities during this time, she led the creation of a transition plan for the new Executive Director and supported the search process.

The Board discussed this agreement with Sue over a few months before reaching the agreement in August. This is a standard practice used to compensate individuals for lost opportunities and ensure organizational stability during transitional periods. The Board and Sue agreed she would receive this retention bonus after the new ED had started.

(3) Compensation as Special Advisor between June 1, 2014 - December 31, 2014: $29,167.

Sue agreed to serve as Special Advisor to the Foundation for a term of one year after the new ED started, from June 1, 2014 - May 31, 2015. The Board felt that it was important to have Sue’s knowledge and experience at hand to support the Foundation as it went through an executive transition. In general, it is good practice to make sure that there is the ability to draw on the expertise of an experienced former executive: in this case, someone who grew the organization from a few people to more than 200.

Sue’s total compensation for her role as Special Advisor was $50,000 per annum, $29,167 of which was reported during the 990 period. This is a small proportion of the total amount reported, as compared to compensation as ED and the retention bonus.

In June of 2015, the Board of Trustees extended Sue's term as Special Advisor for another year, amounting to an additional $50,000. Her term ended May 31, 2016. The compensation for this period is unlikely to be reported in the next 990, as it is much lower than the threshold for reporting. However, Sue has agreed to disclose this total, given the interest in her role as Special Advisor.

We realize this is complex, so to summarize: From January 1 2014 to May 31 2014 Sue was the ED and received her normal salary. When Sue left her position as ED we gave her a one-time bonus of $165,000, to compensate her for staying on during a long transition period. From June 1 2014 until December 31 2014 she received $29,167 intended to compensate her for advising the Board after the new ED started. These are the numbers reported in the 990. Since then, she received a total of $70,833 for work as a special advisor over a period of 17 months (January 1 2015 - May 31 2016).

Other questions

As Special Advisor, Sue reported to the Chair of the Board: first Jan-Bart, then myself. We did not ask Sue to produce a final report on her work as Special Advisor. Her contract did not require it, and we didn’t see any reason for her to create one. Sue was in regular contact with the ED, Chair, and Trustees throughout this period, and we are satisfied that the terms of the contract were met appropriately.

Questions have also been raised about the number of hours spent by Sue during this period. The 990 reports that Sue worked 40 hours per week, which reflects her work while she was Executive Director. Forty hours per week is the standard, full-time employment threshold in the United States; most employers do not track the hours of salaried employees beyond these 40 hours. Sue often worked many more than 40 hours per week during her time as Executive Director. Once Sue transitioned into a consulting role, her hours varied. She consulted on an as-needed basis, sometimes as little as a few hours a month, sometimes many more.

==

Sue’s special advisor status with the Foundation ended on May 31, 2016, and she is no longer on contract with the Foundation or receiving any compensation from it. However, many of the Trustees and Foundation staff continue to maintain close personal relationships with Sue. She played a critical role in developing the Foundation and the movement, and will always be welcome among us. We thank her again for her time and efforts on behalf of our mission, and we are grateful for her continued support and advocacy on our behalf.

We would also like to thank Sue for her willingness to being completely transparent about her compensation here. Many people find this information sensitive. We appreciate that she has said she doesn't mind.

I hope this answers more of your questions, and addresses any confusion.

Patricio

[1] https://lists.wikimedia.org/pipermail/wikimedia-l/2014-May/071458.html