Thursday, January 22, 2009

Transparency and Punishing Success

Even though they're on completely different subjects, somehow Orthonomics' latest posts made me think of this.
And those of us who manage the public's dollars will be held to account -- to spend wisely, reform bad habits, and do our business in the light of day -- because only then can we restore the vital trust between a people and their government. ~ President Barack Obama, Inaugural Speech
...if only there were those in the Jewish community who would say the same. From charities to schools, the Orthodox Jewish world spends much of its time hiding its books. The need for this to change is paramount, and it is difficult to ascertain why there is such a reluctance on the part of Jewish institutions to show transparency in their revenues and expenses.

It seems worthwhile to take a few educated guesses as to why this might be, and feel free to add to or argue against any of these; many will be applicable in rare situations, more would be true in most situations. After this quick list, it is worth elaborating on another possibility which will make some people uncomfortable. For simplicity's sake, we will use schools as an example:
  • Illegal actions - A reason to avoid transparency is if the school is doing something wrong. Hopefully rare or non-existent, but possible.
  • Salaries - A school might not wish to disclose how much it's paying teachers and administrators, whether due to privacy or serious overpayment, particularly of teachers who have stayed a long time. Understandable to an extent, but one of the most likely places for wasting funds.
  • Inefficiencies - The main reason to open up the books is the main reason schools might not want to: They're horribly inefficient in their use of assets. They waste money all over, they tend to create numerous unnecessary positions then hire managers to oversee them. In all, a lot of people are being paid to do very little.
  • Misuse of funds - Similar but different to the first two. If schools are run by tight-knit groups, as is often the case, there is a tendency to favor people from that group and there might be a large portion of funds siphoned off to that group. Transparency would cause an uproar.
But a more troubling explanation, while probably secondary to the others, is that of disparity.

It's worth first using a quick example from today's United States. One of the largest problems the government is now facing due to its ill-advised attempts at bailing out the troubled firms of Wall Street is the view that safe, successful, and smart companies are being unfairly punished for being: Safe, successful, and smart. Bank of America, which by all accounts did the country a tremendous favor in offering to take on both Countrywide and Merrill Lynch and their toxic assets before they failed, wanted to lower the price being paid for Merrill to avoid hurting its own shareholders. Instead, it is essentially being forced by the government to pay the higher amount, give up a stake of BoA to the government, and all while reducing their own dividends to shareholders. In exchange, they get protection on bad assets that were almost all Merrill's to begin with. It's the equivalent of a neighborhood asking for a volunteer to care for an important neighborhood pet, then telling the volunteer when they ask for extra leashes that they'll have to pay extra for them, they're not allowed to spend money on their own family, and the neighborhood will cover the pet's damages.

It would be interesting if a similar skewering of the successful happens in the frum community. In schools, tuition costs make up a certain percentage of the revenues of a school. Rather than charge what it actually costs per student in tuition, and then make up the difference for those who cannot pay in full, schools often charge higher amounts knowing that the more successful parents will still pay in full, and they'll get whatever they can from the others. If schools were more transparent, the disparity would be out in the open - and there would be a tremendous backlash, particularly against those who choose not to work. Imagine paying $40,000 in post-tax money in tuition for four kids a year, while discovering that another family with four kids is paying $16,000? That's the equivalent of earning $40,000+ more a year (pre-tax), for the same utility.

When one considers this, it is easy to understand how schools - consciously or not - would be resistent to transparency. Not only would there be a lot of animosity created or suspicions confirmed, but it would reinforce that the educational system's subtle push for kollel in many places is creating a huge drain on the community as a whole. Moreover, those who are covering the costs of everyone else will quickly tire of it, especially those who are working but not wealthy. Knowing that they can barely make ends meet while working hard, but do not qualify for tuition breaks, while others are able to lead seemingly much easier lives while getting those breaks, these working class families will ultimately feel compelled to create their own schools which require lower - but full - tuition payments.

Lack of transparency and punishing success are two major problems facing the Jewish community economically. What's worse is when one is helping to hide the other.


  1. Great post. You make a lot of good points.
    I think the only way that schools will practice financial transparency is if they are publicly pressured to do so, either by their angry parent bodies, or by our communities' rabbanim (whom I think should exercise some courage and take a stand on this issue, before all of our yeshivahs and day schools come tumbling down.)

  2. I'm including this post in the upcoming edition of HH.

  3. Sadly it is going to get worse before it gets better. Transparency is the enemy of control and power and the schools are not going to willingly go this route. Given the economic situation right now it will take one large/well-known yeshiva to go belly up before "the masses" will put their griping into some sort of real action that would result in transparency, or at least a start towards transparency.

  4. One comment all the way in the beginning caught my attention: about overpayment of teachers.

    Where might that be?? Show me that school!

  5. Very good post. I really appreciated the part about "the educational system's subtle push for kollel ... is creating a huge drain on the community as a whole." So true!

  6. Where might that be?? Show me that school!

    Why so surprised? You don't think every schoold that is slightly larger than average has "teachers" being paid more than their services rendered derserve?

  7. I personally don't understand the need for secrecy behind salaries. Every government employee employees salary, from janitor to school teacher to attorney general, can easily be accessed. Everytime a state or federal employee gets a pay raise, it is published.

    I hear the argument for not publishing individual staff salaries, but it would be nice to know salary ranges. . . and perhaps it would open up a position or two to bid.

  8. SR - I don't see why community Rabbonim would step up barring either the angry parents or some kind of meltdown, unfortunately. (And thanks!)

    ProfK - Probably true, sadly.

    Inspired - Agree with G. While many teachers are underpaid (or not paid what they actually earn, which is even worse), there are too many teachers who get raise after raise for positions which just don't deserve it.

    Frayda - Thanks. It's been a concern for a long time, and the recent economic crisis is going to lead to a lack of donations to cover the difference, too.

    SL - Agreed as well. I've thought about ranges, but those typically don't help things; there ends up being more speculation which leads nowhere and creates greater negativity than simply publishing the salaries would. Perhaps a pooled statistic on salaries with basic data for the public while a smaller external group actually looked at the individual salaries would work; I'm not sure. (Think "The combined salary expense of teachers in the 1st through 6th grades is $1.2m, ranging from $42k - $63k, with a median salary of $51,347.")

  9. An issue at my synagogue's day school? The abundance of scholarships, provided to teacher's children, to aid in the appearance of enrollment. Yes, it is fabulous that they teacher's kids can attend the school...however, to then have to run huge fundraising in order to offset the scholarships...simply to create the appearance that the school is heavily attended? Weird!

  10. Anon - Simply to aid in the appearance of enrollment is just... odd. As an alternative to paying the teachers in dollars, I think such scholarships are typically good ideas and can save both the teachers and the school money.

  11. Ezzie-Check out my latest and related post. It will interest you.

  12. I agree completely with the sentiment of this post but have a nit-picky complaint. The basis for this rant was the rhetoric of a man who will intentionally and flagrantly overspend from a treasury that is already too deep in the red. While I applaud transparency, to use Obama as a stepping stone to this point is ludicrous. While Im sure he intends to be transparent in his spendings, his full intentions are to charge more to the wealthy so that the non-workers can have it easier.

    Otherwise, very well said!

  13. SL - Ooooy.

    Xvi - Oh, sure. I thought that was ironic.

  14. Innocent question:

    Have you ever approached any organizations to ask to see their books or is this heresay?

    I can see why you would suppose it is possible but say you wanted to make a donation but before donating you asked (politely with no suspicion) if you can see their books (also assuming it was a big enough organization to have an accountant etc) would they refuse you?

    I hope you aren't make broad statements without intimate knowledge about which you are speaking.

  15. Jerk - I actually have asked people who have asked, and in one instance asked myself in a light-hearted way of someone I'm close with to see the books. The response I got was "you and everyone else..." - and in a school which is far more open than most.

  16. Move to lakewood. EVERYONE pays FULL tuition.

    Ha ha this has got to be painful for you.

  17. So you are talking about a specific school or 2 or 3 organizations, right?

    I just don't think it's fair to post accross the board like that it's not so nice. Though I do agree that your specific situation is probably frustrating you may have legal recourse if you were interested in pursuing it.

  18. PB - ? There are schools in Lakewood that charge different amounts to people who learn, are there not? And it was a school there which shut down for a bit when teachers were fed up with nonpayment.

    Jerk - Um, no. I'm talking about nearly every frum school or organization. Almost none have open books. I am referring to frum society in general - not specific situations.

  19. "There are schools in Lakewood that charge different amounts to people who learn, are there not?"

    Where in heavens name did you hear this? If you can find a name of a school I will be happy to call and verify but I do not know of one.

    I heard the Pizza shop has special prices for learners. I may ask to see their books. ;)

  20. Do a search. Quoted in numerous places.