OCLC executive compensation
Compensation for OCLC executives and corporate officers is disclosed in the organization's annual Federal Tax Form 990 filing. The 990 is the Internal Revenue Service (IRS) form filed annually by organizations which are exempt from income tax. The IRS uses this form to assess compliance with the Internal Revenue Code. Along with such items as organizational assets, receipts and expenditures, the compensation of officers, directors, trustees and key employees is disclosed.
As in most organizations, executive compensation is determined by using market data, external compensation consultants, merit and historical benchmarks. Compensation for the CEO is set by the Board of Trustees. The CEO recommends appropriate executive compensation for other officers which is then reviewed and approved annually by the Board. OCLC's Board is comprised of librarian trustees elected through the organization's Global Council and non-librarian trustees, elected by the Board itself, from fields outside librarianship. Support for the Board's role in executive compensation oversight is documented and provided by its Personnel and Compensation Committee and qualified external consultants.
How executive compensation is determined
OCLC executive compensation is comprised of standard components including base salary, annual performance-based compensation and long-term performance compensation. These three components together make up what is generally referred to as total cash compensation. Annual performance-based compensation and long-term performance compensation are "at risk" meaning payment is variable and reliant on organizational and individual performance. All compensation is benchmarked against appropriate market comparators.
Each year, the Board approves specific objectives for the OCLC organization, geographic regions, product segments and individuals. Payment of any performance-based compensation depends on enterprise, segment and individual performance. Base salaries may be adjusted depending on merit, promotions or market comparisons. Economic conditions within the library community also play a role in executive compensation. For example, in Fiscal Year 2003-2004 and Fiscal Year 2009-2010, OCLC eliminated merit increases for all staff including executives.
To help determine and evaluate executive compensation, the Board and its committee use an external, independent consulting firm. The firm and its role may change, from time to time, depending on the needs of the Board and shifts in the external environment (regulatory, labor market changes, etc.). In Fiscal Year 2009-2010, Towers Watson was retained to review executive total cash compensation and benefits relative to an appropriate group of comparator organizations. Additionally, Towers Watson provided a positive opinion as to the reasonableness of OCLC executive compensation in relationship to IRS Section 4958. Such market and tax code evaluations have been conducted on a regular schedule by compensation consultants and tax/accounting firms for several years. In all assessments, compensation was considered to be appropriate and reasonable.
OCLC is a unique organization as a membership cooperative with global operations and strategic business attributes. The OCLC CEO and executives must be capable of conceiving and executing a business strategy with an economic return sufficient to allow OCLC to be self-perpetuating. Expertise in financial planning, marketing and sales, strategic product management, mergers & acquisitions, public funding models and technology development and use is required. As a result, the relevant talent market for OCLC executives is typically general industry, technology, higher education and other membership organizations.
The following attributes and competencies have been applied to OCLC's leadership in the determination of appropriate comparative compensation data.
- Relationship management and development. OCLC is a membership organization where data and information management serve as the core of products/services and is in the control of its members. The operation of the organization is highly relational from both the perspective of the members, partners, customers and service providers within OCLC.
- Business operations. Operations largely focus on data collection, organization, and dissemination, and information retrieval. The purpose of developing and delivering products and services, particularly information, appeals to global members and is economically valued.
- Global nature of the organization. OCLC has served 72,000 libraries in 171 countries. Approximately one-third of OCLC's revenue and product utilization occurs outside the United States. With 23 offices in ten countries, OCLC operations exist and are conducted on a global basis.
- Technology. This element addresses the extent to which OCLC's data platforms are driven by and dependent upon advanced technology and technology innovations. OCLC's technology infrastructure must be able to support webscale operations with the highest service levels and system redundancies to ensure continued library operations.
- Professionalism or support for a recognized profession. This category involves helping a profession deal with the substantive issues of professional practice. It also includes training and development of professional members, or improving the status and public perception of the profession.
- Education. This element focuses on education of the public. OCLC is a critical service provider to the education sector. Its vision is to help libraries and their patrons by providing economical access to knowledge. OCLC's operating purpose is to elevate access to and use of worldwide scientific, literary, and educational knowledge. OCLC is not the educator; its products and services are integral to the education process.
- Research and development. This aspect relates to the development of new products, services, or other intellectual capital, particularly as a function of the institutional mission. This is a distinguishing feature for OCLC.
- Talent market. OCLC recruits management and staff nationally and internationally. Compensation and benefits are calibrated appropriately.
Using these attributes and considering the unique nature of OCLC, external compensation firms gather and review information and compensation/benefit data from a variety of organizations. These organizations have attributes and characteristics similar to OCLC and include:
- Public Companies. These are firms which operate in the business of data collection, organization and dissemination or information retrieval with technology as a core competency. They typically operate globally and use conventional business practices.
- Private companies who participate in a proprietary survey. These organizations have operational characteristics, competencies and attributes which are similar to OCLC.
- Tax-exempt member/professional organizations. Sophisticated membership/professional organizations comprise this segment of comparatives.
As indicated, OCLC makes all appropriate disclosures on executive compensation in the organization's annual 990 filing. Disclosures may vary depending on the individual officer's participation in various programs. Certain officers, such as the CEO, may participate in deferred compensation programs which carry "at risk" characteristics. For example, OCLC's CEO previously deferred compensation into a 457f plan. The 457 plan is a type of tax advantaged defined contribution plan. The employer provides the plan and the employee defers compensation into it on a pre-tax basis. 457(f) plans are made available in non-profit organizations because non-profits are limited in the types of non-qualified deferred compensation plans which can be offered. Deferrals are disclosed when they are made and disclosed again when a distribution is taken. And in the case of OCLC's plan, deferrals are subject to forfeiture in certain events.