Performing Arts Center Presidents Experience Significant Cuts in Compensation Due to the Pandemic
A DHR Survey and commentary from James Abruzzo, Managing Director, Global Nonprofit Practice
The Covid-19 pandemic has devastated the performing arts industry. By mid-March 2020, throughout North America, all symphony, opera, ballet, modern dance and theater performances were cancelled, resulting in major economic losses to the respective organizations. The performing arts centers that host many of these companies lost the rental income and other performance-related income like restaurant profits and parking receipts. In addition, at performing arts centers, touring Broadway and other touring acts normally presented for a net profit were cancelled.
Management and union layoffs ensued and those artistic and management personnel at performing arts centers who remained employed were faced with significant reductions to individual income. The precise amount of those cuts is not known. In September 2020, James Abruzzo, Global Head, DHR International Nonprofit Practice, surveyed performing arts center executives in North America to find the answers.
Abruzzo polled the CEOs of 56 performing arts centers who are members of the Performing Arts Center Consortium (PACC), the Broadway League, and/or the Independent Presenters Network. Added to that list are current and former performing arts center clients.
These are the organizations who manage theater spaces, are engaged in presenting and producing live arts events, and renting their theaters to arts groups and community groups. All are based in North America, two from Canada. There was a broad geographic distribution of organizations polled, as well as a broad distribution of pre-Covid operating income budgets, which ranged from less than $10 million to more than $50 million in expenses per annum. More than half (32 in total) of the CEOs to whom the survey was distributed responded.
CEO Salaries Were Reduced
Almost 85% of respondents experienced some reduction of their established annual salary, beginning in March or early April of FY 2020. Of those CEOs, approximately 60% saw a salary reduction of 20% or more, and four experienced a reduction in salary of 50% or more.
CEO Bonuses Were Eliminated
The compensation of performing arts center CEOs usually includes a bonus. Of the respondents, approximately 70% reported being bonus eligible, which conforms generally to the field at large. Of those respondents, the average potential bonus pre-Covid was 24% of salary, which is slightly higher than the average for the majority of those who receive bonuses in the field. Of the respondents who were bonus eligible, only about 1/3 of those who answered the ‘bonus’ question received all or part of their bonus for the year.
The Loss of Total Income Was Significant
The total loss of individual income (salary plus bonus) for FY 2020 experienced by performing arts center CEOs has been significant, ranging from a low of $22,500 to a high of “$460,000+.” The average, for those reporting a loss in income, was approximately $108,000. This loss is the total just for the three or four Covid-affected months of fiscal year 2020. Furthermore, only three respondents reported that some or all of that loss will be deferred for payment at a later date.
Executive Management Team Members Also Experienced Salary Reductions
At organizations where CEOs experienced reduced salaries, executive management team members also had their compensation reduced. The reductions were, by and large, lower than those sustained by the CEOs, but still significant. More than half of executive management team members took salary cuts of up to 20%.
The DHR International, Nonprofit Practice survey did not collect data on the bonus reductions of executives, however, we assume that if the organization’s CEO did not receive a bonus, neither did the members of its executive management team.
The Immediate Future is no better
The respondents’ predictions for when and/or under what circumstances executive salaries might be reinstated varied. Many believe that their organization’s return to regular business operations will signal the possibility of salary reinstatement. In this case, a return to regular business operations will mean that consistent earned revenue sources are recaptured, which will probably coincide with theater openings – live performances, full capacity audiences, a full slate of productions, etc.
In any event, there is a clear link between the financial health of the organization and its ability to compensate its executive staff at pre-Covid levels. Many respondents predicted that their organization’s executive salaries will be reinstated to pre-Covid levels sometime within FY 2021. However, others believe that the reductions could continue into FY 2022 or beyond; and, in many cases, it wholly depends on the organization’s return to regular operations.
But salary reductions are not the real story. Based on an additional survey conducted around the same time, we know that the average tenure of performing arts center CEOs is almost 15 years, and the average age of the CEO is well over 60. These executives have devoted their professional lives to building organizations, hiring staff, creating subscription bases, extending donor pools and recruiting board members, only to see their reasons for doing all of this disappearing.
In addition to salary and bonus reduction, these executives who are used to seeing a problem and solving it, are finding the “goal posts shifting as they come out of the huddle.” Seasons are rescheduled only to be postponed again. More importantly, the psychic reward they all enjoy, of experiencing the live arts and witnessing the power of the live arts on their communities, has stopped suddenly and there is no short-term prospect for restarting.
So, while salary reductions in fiscal year 2020 and 2021 are real, and palpable, the more important story and the significant impact on the industry, will be felt personally and psychologically for these CEOs, their executives, and others who are running symphony orchestras, opera and ballet companies, theaters and festivals.