Elaine Chao Leaves United Way

Elaine L. Chao, president of United Way of America, has announced that she will step down from

the organization sometime before September 1. She said she would take a job at a Washington think tank.

Ms. Chao has been the charity’s top staff leader for more than three years. She took the position after a nationwide scandal over the $465,000 compensation package and the financial practices of her predecessor, William Aramony. She said she was leaving because she had accomplished the goal she had when she took over: to clean up an organization in disrepair.

Departure Payment

The financial package Ms. Chao will receive when she leaves has raised some criticism from non-profit leaders. Under a “departure agreement,” Ms. Chao will receive two payments totaling 18 months’ worth of her $195,000 annual salary. She will get a total of $292,500 in two installments -- the first early next year, the second in 1998.

According to United Way of America officials, that money will come out of the pockets of one or more of the group’s 45 board members. They said the donors had elected to remain anonymous.

When United Way of America hired Ms. Chao, it agreed to pay her 18 months’ salary if it dismissed her for any reason other than an illegal activity. Even though the amount she will receive is exactly the same as under that agreement, board members took pains to make it clear that they had not asked Ms. Chao to leave.

A search committee headed by Paula Harper Bethea, chairman of the United Way of America board, is being formed to seek a new president for the organization. The charity hopes to have a new leader by the end of summer.

Ms. Chao’s departure agreement is unusual for an executive resigning voluntarily, according to some former United Way officials and outside compensation experts.

Questions About Bonus

They said the amount was high given normal compensation practices, previous controversy over generous compensation at the organization, and the charity’s continuing financial problems -- even though the money is being donated specifically for Ms. Chao. Although officials say the charity will post two consecutive years of increased contributions in 1994 and 1995, local United Ways across the country have seen their overall donations drop by 10 per cent between 1990 and 1995, after accounting for inflation, United Way of America estimates.

“She was underpaid, but the departure agreement is very unusual,” said Jay Berger, co-president of Morris & Berger, a Pasadena, Cal., recruiting firm that places chief executive officers at charities and corporations. “The payment is high and it does sound as if she has been terminated, no matter what anyone is saying.”

Ms. Chao said she was angered by suggestions that she had been asked to leave and by the controversy over the resignation bonus.

The payment was “a wonderful gesture” and “a testament to what I’ve done here,” said Ms. Chao, noting that she had paid many of her expenses herself, including about $7,000 annually for entertainment and other costs, and had declined raises for three years running.

The payment to Ms. Chao is being made “in recognition of her achievements during a very difficult time for this organization,” said Charlie Kolb, general counsel for United Way of America.

Board members and local United Way officials said Ms. Chao had made extremely important contributions. Under her leadership, the system developed its first-ever strategic plan and expanded the board to include more local United Way officials and volunteers.

Chief among Ms. Chao’s other accomplishments, according to Ms. Bethea, were re-establishing credibility for the organization in the eyes of the public and securing the group’s financial well-being.

In 1992, following widespread negative publicity over Mr. Aramony’s compensation and management style, United Way of America saw 309 of its 1,378 local United Ways drop out of the national organization and refuse to pay their annual dues.

Since then, the number of local United Ways has climbed back up to 1,322. Under Ms. Chao’s leadership, the budget of the national organization has also increased by nearly $3-million since hitting a low of $20.9-million in 1993. “Elaine did an incredibly competent job of renewing accountability, and she re-established a sense of professionalism among national staff,” said Harve A. Mogul, president of the United Way of Dade County in Miami.

Some former United Way employees and volunteers affiliated with the organization were not as complimentary. Speaking on the condition of anonymity, they said the relationship between Ms. Chao and member United Ways, the board, and staff of the national organization had been troubled.

Some said that Ms. Chao, a former banker and government official with no experience in running a large and complex charity, was not equipped to deal with the issues facing United Way: changes in the business world that make it more difficult for the organization to raise money from workers, competition from other on-the-job drives, and intractable social problems.

Since the Aramony controversy, donations have rebounded at some United Ways, but many have yet to realize the level of contributions they saw in 1991, the year preceding the scandal.

Future Plans

Ms. Chao said she would accept a position at a Washington think tank, but she declined to name the organization.

She also said she would work as a volunteer on Bob Dole’s Presidential campaign, she said, as well as on the re-election campaign of her husband, Sen. Mitch McConnell, a Kentucky Republican.

Some non-profit officials have speculated that Ms. Chao may be angling for a position in a Dole White House, but Ms. Chao maintained: “I am not seeking any position in a Dole Administration.”