Pay package awarded to WHYY chief questioned

WHYY is a relatively low-profile station in the world of public broadcasting.

It doesn't produce flashy, syndicated television shows like Frontline, from Boston's WGBH, or Nature, from New York's WNET.

Among public stations in the top-10 markets, it is in the middle of the pack for budget and staff.

WHYY is tops in one category - how much it rewards its chief executive.

President and CEO William J. Marrazzo's potential pay, benefits and expenses totaled $740,090 in the year ending June 30, 2007, according to its most recent tax filing. The package consists of $415,993 in salary, $317,240 in benefits and $6,857 in expenses.

Those benefits include $280,000 in deferred compensation reported to the IRS that Marrazzo will receive next July if he meets performance goals, as he has in the past.

Marrazzo's total outstripped that of chief executives at WNET and WGBH, with five and six times WHYY's revenues. It also exceeded the compensation of the heads of the Public Broadcasting System and National Public Radio, networks that serve stations countrywide.

As a public station, WHYY received nearly $4 million in tax dollars in 2007. It spent $2.63 out of every $100 in expenditures on its CEO - more than any other public station in the largest markets.

WHYY board members, including chairman Jerry Sweeney, said Marrazzo is worth the money because he put the station on sound financial footing, has strong ties in the business, civic and cultural worlds, and has expanded WHYY's services to the community.

The pay package, said Sweeney, is essential to keep Marrazzo at WHYY, where he is leading a $50 million fund-raising drive and guiding it through a complex transition from analog to digital technology.

"The board takes the long view, which is we want a platinum station," Sweeney said. "Marrazzo is the guy who executes all that."

Marrazzo, 59, said responsibility for his compensation fell to WHYY's board. "They designed the package. I didn't," he said.

He noted that "executive compensation is a very high-profile aspect of running an operation." Pay should match performance, he said, and "we've had three really excellent years" of growth in local programs and contributions.

As is common among executives at nonprofits, Marrazzo made donations to his organization. He gave a total of at least $90,000 to WHYY over the last four fiscal years, according to its annual reports. He and Sweeney declined to specify the amount. "In any nonprofit you would expect the executive team, as well as the board members, to make contributions," Sweeney said.

Interviews with experts in executive pay, nonprofits and public broadcasting raise questions about Marrazzo's compensation and suggest it is inconsistent with the station's size and the quality of its original TV programming.

"It's definitely off our charts," said Ken Berger, president and executive director of Charity Navigator, an independent, nonprofit Web site that evaluates nonprofits' financial performance using federal tax data.

Charity Navigator gave WHYY two stars out of four for the fiscal year ending June 2006. Two stars mean an organization "needs improvement," Berger said. Charity Navigator has not analyzed the latest WHYY data.

"It's embarrassing," former WHYY radio reporter Joel Rose, who left the station last year, said of Marrazzo's pay. Added Rose, now a freelance contributor to NPR and a substitute host on WHYY's Radio Times, "I had a hard time telling my friends to give to the station."

Leland Ware, the board vice chairman and a professor of law and public policy at the University of Delaware, said: "We also know how this looks to the public. But this is a deliberate strategy we adopted to maintain and grow."

Marrazzo's $740,090 pay package is 14 percent higher than the $646,758 he received the prior year. Sweeney and others would not discuss Marrazzo's performance goals in his past contracts, or details of his new multiyear contract, which the board has agreed to in principle, but not approved.

The Delaware Valley's major public broadcaster was born a half-century ago.

Philadelphia Mayor Richardson Dilworth called the launch of WHYY's TV signal in 1957 "an example of the spiritual awakening of the city" and "what citizens can do when they work together." Its aspirations were embodied in its call letters: "Wider Horizons for You and Yours."

More than 50 years later, the station, based in stylish headquarters on Independence Mall, offers programs on TV's Channel 12 and radio's 91 FM, as well as three digital TV channels and a digital HD radio station. It has 208 employees, and produces the nation's third-most popular public radio show, Fresh Air with Terry Gross.

Even so, what those horizons are and who benefits most is a contentious matter.

Last year, critics printed bumper stickers with a red circle and slash over WHYY: "Its CEO makes over $400,000. Do you?"

ActionAIDS, a Philadelphia nonprofit that had volunteered to answer phones for a WHYY pledge drive last year, "respectfully declined" after learning of Marrazzo's pay.

"An organization that would have that kind of disparity in salaries and would be paying someone at that level would be at odds with what we value as an organization," said Kevin Burns, its executive director.

Other groups would not comment on Marrazzo's pay, but said they backed WHYY projects.

"We certainly are a big supporter of the programs they do," said Nancy Brent Wingo, executive director of the Hamilton Family Foundation, which has funded projects at WHYY. She said Marrazzo's compensation was between him and his board.

Said Ayele Ajavon, spokesperson for Lincoln Financial Foundation: "We give grants to programs, not to individuals."

Also last year, Charity Navigator listed WHYY among "10 Highly Paid CEOs at Low-Rated Charities," citing its overall fiscal health, including the proportion of expenses dedicated to programming, administration and fund-raising.

"I don't think Charity Navigator's list is a valid criticism," said Marrazzo. He said the group used "old information" and that its salary data did not take into consideration WHYY's needs, and the regional labor pool.

According to Charity Navigator, WHYY spent 61.5 percent of expenses on programs - in the bottom 10 percent of all nonprofits examined by the group - and 25.3 percent on fund-raising in the fiscal year ending June 30, 2006.

The charity watchdog said the most efficient public broadcasters spend 15 percent or less on fund-raising.

Marrazzo entered broadcasting in 1997, after stints as Philadelphia's water commissioner and CEO of Roy F. Weston Inc., an environmental consulting firm in West Chester. Tasty Baking Co. CEO Charles P. Pizzi was on the WHYY board as the station sought a successor to president Frederick Breitenfeld Jr. Pizzi suggested Marrazzo, a former colleague from city government.

At the time, public broadcasting was feeling the pain of progress. Niche cable outlets such as the Discovery Channel and History Channel were producing shows that siphoned viewers from public stations. They still are.

Nielsen Media Research reported that from 2006 to 2008, during each May "sweeps" measuring period, TV12 saw a decline in the average number of weekday viewers, from 23,000 to 21,000. In prime time throughout the week, however, average viewership rose slightly, from 40,000 to 41,000.

Like other broadcasters, Marrazzo has piloted the changing terrain by expanding the station's reach through the Internet and digital media. He has used the station's headquarters as a civic-gathering space and marketed WHYY as a brand.

Marrazzo also is active in civic organizations including the CEO Council for Growth and the Philadelphia Education Fund.

He has maintained professional ties with utility companies. As a director for American Water Works Inc. and for Amerigas Partners (where he sits on both firms' compensation committees), he earned a combined $153,500 last year, according to Securities and Exchange Commission filings.

Marrazzo's $740,090 WHYY compensation easily led all other public-broadcasting station executives for radio and/or television in 2006-07.

His nearest rival was Al Jerome, president and CEO of Community Television of Southern California, which includes KCET TV and radio in Los Angeles, who received $599,401.

At National Public Radio, which serves all local public radio stations, president Kevin Klose's total 2007 compensation was $624,228 from NPR and its foundation, including $154,065 listed as deferred until future years. The head of the Public Broadcasting System, Paula Kerger, made $486,927 in total compensation in 2007.

Explaining its CEO's compensation, WHYY noted on tax forms that Marrazzo received extra money in 2005 and 2006 for "retroactive tax liability incurred on retirement benefits." The added taxes arose from IRS regulatory changes that were part of a broader crackdown on high CEO compensation.

Sweeney and other board members credit Marrazzo with improving WHYY's finances, including leading the $50 million capital campaign, of which $37.2 million has been raised before it enters a final, public phase next year.

"The organization continues to do well in a very uncertain time, and that's important," said Sweeney, who is president and CEO of Brandywine Realty Trust.

The station points to growing revenues, which increased from $29.1 million to $29.9 million from the 2005 to 2007 fiscal years, tax returns showed. After five years of deficits, the station has shown a budget surplus for three years - it was $1.8 million in 2007 - and officials project surpluses in 2008 and 2009. (Of the 11 stations The Inquirer examined in the top 10 markets, six had surpluses and five had deficits.)

Besides finances, another measure of Marrazzo's performance is original programming. Especially on the TV side, many experts say, the station has done poorly.

There are some new programs, such as the arts show On Canvas, and expanded news coverage on the Internet as well as TV and radio. But critics say its original productions are unambitious, often filmed with a stationary camera or two, or are too often based on nostalgia.

"It looks one step above a public-access channel," said Alan Raymond, an Oscar-winning documentary filmmaker who lives in Gulph Mills. "Some guy gets a camera and mike and goes and shoots, and there's no editing whatsoever."

"I think there's a wide concern about the lack of local programming in public broadcasting, and that includes WHYY," said Bill Siemering, a founding member of NPR's board of directors and a former WHYY executive. Viewers "have a right to expect more local programming."

Marrazzo said the station is expanding local programming, and seeking to add "a larger and larger volume of local multimedia experiences" that are "world class, but uniquely resonating here in the Delaware Valley."

Sweeney and Marrazzo said it is unfair to compare Marrazzo's pay only with public broadcasters. A more appropriate comparison, they said, is with regional nonprofits and for-profit media.

"I think WHYY is undeniably a player in the media landscape which is largely populated by commercial ventures," Marrazzo said. "That thinking framed the board's compensation package. We happen to be a nonprofit."

Pablo Eisenberg, a senior fellow at Georgetown University's Center for Public & Nonprofit Leadership, strongly disagreed with that approach.

"You don't compare with the private sector. They don't give a damn about taxpayers' money," he said. He added it was "inexcusable to have such a high gap between the highest and next-highest paid individual."

At WHYY, the next-highest paid executive was Bruce Flamm, who recently left as chief operating and chief financial officer. He earned $207,023 in salary and benefits in the 2007 fiscal year.

IRS regulations say a nonprofit's board must show that its CEO compensation is in line with similar organizations or there is a special reason for high compensation. Board members can be held responsible if the IRS deems the compensation excessive.

Equilar Inc., an executive compensation researcher based in California, found that the median annual compensation for CEOs at private-sector media and entertainment companies with revenues of $15 million to $60 million - up to twice the size of WHYY - was $537,513.

Marrazzo's compensation exceeds other benchmarks as well. A 2008 Philadelphia metro-market study by Charity Navigator showed the median compensation of nonprofit CEOs is $116,634. And in the private sector, the average salary and bonus for a commercial station manager in a Top 10 TV market - Philadelphia is fourth - was under $500,000, according to the National Association of Broadcasters. (That 2005-06 figure is the latest available.)

No comparison is perfect, especially when it comes to public broadcasting, which relies so heavily upon individuals' support. In 2007, WHYY got 12 percent of its funding through taxes, 28 percent from program support, 50 percent from contributions, and 10 percent from other sources. The station had 104,987 contributors last year (down from 111,743 in 2005) who gave $15.7 million.

WHYY's funding, Sweeney said, "is from hand-to-hand combat."

And that's part of the issue.

If a station pays its top executive so well, said Gary Poon, a Washington-area communications lawyer who worked for PBS in the '90s, "I think there's a little bit of contradiction when public broadcasting goes on the air and says, 'We need your help, we need to raise money to operate.' "