Article Misrepresents CEO Compensation
Piece Includes Misstatements about Executive Compensation at GMAC
RESTON, Va. (Apr. 24, 2019) — GMAC is a global association of business schools with multiple offices around the world. Headquartered in Reston, VA, our organization has various compliance and complex regulatory requirements, including non-profit status in the United States which requires us to file a Form 990 each year with the US Internal Revenue Service (IRS).
GMAC’s most recent 990 filing, for the 2017 reporting period, became public this month and on April 23, an article was posted that included several erroneous statements about executive compensation practices at GMAC, and specifically for GMAC’s CEO.
The article stated that GMAC CEO compensation for tax year 2017 was $1.9M. In reality, the Total “Annual” Target Compensation (TTC) under GMAC’s CEO contract is less than half that amount. TTC is the combination of base salary, annual bonus and incentives to meet long-term goals.
Because of IRS reporting requirements, certain elements of compensation are reported twice, once when they are earned (accrued) and again when they are paid out. The result was that the CEO’s long-term bonus (2014-2016) was reported twice, once in each year that it was accrued (2014 to 2016) and again in the year that it was paid (2017). The article aggregates these figures as the basis to create an inflated annual salary for the GMAC CEO that is misleading.
The article stated that our CEO received a 22% increase in base compensation in 2017. In reality, the board negotiated a new contract with the GMAC CEO in 2017 that increased TTC by 2.9%. The article also implies that GMAC pays its CEO far more than larger organizations like ETS. In fact, the board annually surveys organizations similar to GMAC and ensures that we are in an acceptable range to our peer organizations. Their guidance incorporates relevant market data for similar executive positions in organizations of comparable type, size and complexity to GMAC.
In line with IRS governance questions on the 990, GMAC’s Board of Directors and its Compensation Committee maintain sole governance over CEO compensation. The board has a fiduciary responsibility to GMAC and its mission, and in keeping with this, uses an independent, outside compensation firm to validate and survey the market to make well-informed decisions on executive compensation. While the April 23 article attempts to present a picture of inflated CEO compensation by highlighting IRS rules that lead to double reporting of compensation data, the board conducts a rigorous review to establish GMAC’s CEO’s compensation appropriately for an association with annual revenues close to $100 million.
The GMAC Board has charged the CEO with ensuring GMAC’s long-term sustainability by reducing its reliance on the GMAT test alone and entering new lines of service consistent with our mission to provide solutions for business schools and candidates to discover and evaluate each other. During this reporting period, revenues from non-GMAT sources grew and have continued to accelerate in subsequent years. Total testing volumes increased by 36.6% during this same period due to the introduction of the Executive Assessment and NMAT testing programs, and GMAT test volumes increased 3.4% during this 2014-2016 period from 251K tests delivered in 2013 to 259K tests delivered in 2016. Also, since 2013, GMAC has added almost $15M in diversified revenues to combat the decline in GMAT test takers.
Taken in isolation, without clear explanation of IRS rules and reporting requirements, a 990 does not tell an organization’s story in its entirety. GMAC’s most recent 990 is consistent with the organization’s pursuit of a multi-year diversification strategy aimed at serving the needs of the graduate management education field, both schools and candidates.
For additional questions on this matter, please contact Geoff Basye, GMAC Media Relations Director, at email@example.com or (703) 668-9799.