Board Never Saw Greco's Salary, Says Pike

Though the Direct Marketing Association contends its Compensation Committee raised President John Greco's controversial salary appropriately during periods of growth and froze it when the U.S. economy began to decline, dissident board member Gerry Pike claims it did so in violation of DMA bylaws.

What is more, Pike -- who is collecting proxy votes in advance of the DMA’s annual business meeting on Oct. 18 in San Diego -- claims that the DMA was being misleading in a Sept. 25 letter to members when it claimed he never voiced concern about executive salaries at either a Board meeting or a meeting of the Compensation Committee.

According to Pike – who has never held a seat on the compensation committee – Greco's salary was never brought before the board.

Greco received $720,671 in salary and $117,857 in benefits in 2007, according to the organization’s most recently available tax records.

According to Pike the DMA's Compensation Committee doesn't have the authority to set executive salaries.

Pike points to two clauses in the DMA’s bylaws which form the foundation for his concerns. The first – article VIII, section 7 – reads, in part, “The Compensation Committee…whose duty is shall be to review the compensation of the president and his recommendations for the members of the senior staff” [emphasis Direct Newsline’s].

Couldn’t “review” be construed as meaning setting the salary? According to the bylaws article 6, section 4, “The Board of Directors shall have ultimate control and management of the affairs of the Association, with authority to engage and discharge employees and agents of the Association, fix salaries and remunerations…” [emphasis Direct Newsline’s].

“The Compensation Committee has the power to review, not approve,” said Pike.

Pike, who has sat on the board of directors during the last three years, and the executive committee during the last two, has never had a seat on the Compensation Committee.

“Without exception,” Pike has been to every board and executive committee during that time, he told Direct Newsline. And in that time, the subject of Greco’s salary has never been brought before the board of directors, he added.

Asked for comment, DMA chief communications officer Sue R. E. Geramian responded “The DMA Compensation Committee has followed a very deliberative and thorough process, in line with IRS recommended best practices, to evaluate the reasonableness of the compensation of the entire DMA executive management team. This process has been applied consistently by the DMA Compensation Committee over the past 5 years. We are confident that the Compensation Committee has acted properly and responsibly during that time. We have no further comment.”

This is not the first time DMA officials have portrayed the Compensation Committee as being the arbitrator of Greco’s salary. In its Sept. 25 letter to members, which followed Pike’s first message seeking proxy votes, the DMA wrote, in part:

“With regard to executive compensation, again Mr. Pike only provides limited information and tellingly omits salient points. The Compensation Committee of the Board of Directorsreviews and approves the president's compensation with close attention to comparable organizations” [Emphasis Direct Newsline’s]. The Committee believes the terms of compensation have been appropriate in years when the business was growing rapidly. When the current recession took hold and the impact on DMA became apparent, the Compensation Committee froze all executive compensation, including that of the president, effective months ago. Mr. Pike does not mention this although he was aware of it as a member of the Board’s Executive Committee (EC). Mr. Pike also neglects to mention that he never voiced concern about compensation at a meeting of the Board of Directors, or of the EC. In fact, it was his colleagues on the Compensation Committee, all of whom continue to serve on the Board, who properly and responsibly ensured sound governance with respect to executive compensation.”

Asked for his thoughts and reactions to the above paragraph, Pike offered a point-by-point analysis.

Regarding the line “Mr. Pike only provides limited information and tellingly omits salient points”, Pike told Direct Newsline. “There is limited information because the board has received no information about this compensations package. It has never been brought before the board or the executive committee in my three years.”

Pike points to the two excerpts from the bylaws mentioned above as clearly delineating the roles the Compensation Committee and the board of directors each play in determining the president’s salary.

“The board of directors is mandated by our bylaws to fix salaries and remunerations,” Pike said. The Compensation Committee, he added, reviews the salary.

“Obviously something was presented to the compensation committee because the guy [Greco] is getting a paycheck,” Pike said. “But they don’t have the authority to approve anything.”

As for the “close attention to comparable organizations” element, Pike said “I have no idea what the comparables are, as the compensation package was never presented to the board or to the executive committee while I have been sitting on those two bodies.”

But Pike does note that one of the two signatures on the DMA’s Sept. 25 letter was board chairman Kelly B. Browning. Browning is also executive vice president of The American Institute for Cancer Research (AICR). His signature appears on that organization’s form 990 for the year ending June 30, 2008.

That year Marilyn Gentry, the AICR’s president, made $322,566 in compensation, along with an additional $113,223 in contributions to employee benefits plans and deferred compensation plans. Greco’s salary during the same period was $720,671, with contributions to employee benefits plans and deferred compensation plans of $117,857 according to the DMA’s form 990.

Are the organizations the same size? Based on annual revenue, the DMA is nearly 13% larger. For the year ended June 30, 2008, it reported total revenue of $39,324,747, while the AICR generated $34.839,632.

The DMA’s Sept. 25 letter states “The [Compensation] Committee believes the terms of compensation have been appropriate in years when the business was rapidly growing. When the current recession took hold and the impact on DMA became apparent, the Compensation Committee froze all executive compensation, including that of the president, effective months ago. Mr. Pike does not mention this although he was aware of it as a member of the Board’s Executive Committee (EC).”

Pike’s response? “As it was never made public to either the board or the executive committee, I have no way of confirming or disputing that. It has never been presented. How can you confirm or dispute something you have never seen?”

He continued “There has been a freeze at DMA, but as we do not know the compensation package, we do not know at what level anything has been frozen. We have been given no figures as a board or as an executive committee. Yes, there was a general freeze of salaries at DMA, but at what level? I don’t sit on the compensation committee. The minutes of the Compensation Committee have not been made public to either the board or executive committee. I have not requested them.”

To the DMA’s assertion that “Mr. Pike also neglects to mention that he never voiced concern about compensation at a meeting of the Board of Directors, or of the EC,” Pike responds “Correct. Because it has never been a topic at a meeting of the BOD or EC. This is why I raised the issue. This is why I am conducting a proxy campaign. I found out the by-laws had been violated. How are you to raise it when you don’t know what it is. When I came across the NPT, the form 990. That is the first time I found out about it. My colleagues found out when I found out when I sent them my Sept. 25 e-mail.”

Finally, the DMA letter stated “In fact, it was his colleagues on the Compensation Committee, all of whom continue to serve on the Board, who properly and responsibly ensured sound governance with respect to executive compensation.”

Pike’s response? “I have no Compensation Committee colleagues as I do not sit on that committee, and never have.”