Golf Associations provide a variety of services paid primarily
by membership dues. A partial list of
those services would include 1) handicap administration, 2) course rating and
measurements, 3) golf publications, 4) member tournaments, and 5) sometimes
ownership of a golf course. Most of the
services are of little or no value to the average golfer. The only service that is a necessity is the
player’s handicap. Golf associations,
however, do not sell the handicap service separately. Instead they follow the cable industry model
and bundle all of the services for one price—You say you never watch the
Hallmark Channel? Too bad.
Associations have another advantage in that they are
monopolies. There are other
organizations that sell handicap services (Myscorecard, for example), but these
handicaps are generally not accepted at club tournaments. This monopoly power lets the golf association
charge higher than the free market prices for handicaps as well as bundle
unwanted services. Table 1 presents the
percentage of membership dues spent on the handicap service for a sample of
state golf associations. These numbers
were extracted from Income Tax Form 990 filed by each organization. These are only rough estimates since each
association accounts for costs and revenue differently. The consistency of the percentages, however, indicates
roughly 10 percent of membership dues are spent on the handicap service.
Table 1
Handicap Costs as a Percentage of
Membership Dues (2013)1
Association
|
Membership
Dues
|
Handicap
Cost
|
Percentage
|
Colorado State Golf Association
|
$1,346,753
|
$125,141
|
9.3
|
Northern California Golf Assoc.
|
$6,404,947
|
$331,832
|
5.2
|
Oregon Golf Association
|
$1,380,620
|
$113,345
|
8.2
|
Southern California Golf Assoc.
|
$4,813,105
|
$481,260
|
10.0
|
Washington State Golf Assoc.
|
$1,942,900
|
$164,352
|
8.5
|
What does an association do with the excess revenue it
collects? Most associations would argue
the money is invested for the good of the game—e.g., association golf courses,
junior golf, scholarships. These may be
good endeavors, but why should a person wanting a handicap be forced to donate
to the charities the association wants to support?
In truth, most of the charitable donations made by
associations are small. The Florida
State Golf Association, for example, with annual revenue close to $5 million
gave only $26,000 in college scholarships. More likely, bureaucracies follow the
commandment “Pay thy own self first” and direct discretionary income to management
salaries. As shown in Table 2, the wages of the key
executive at each association increases with the size of the membership. With more dues there is more money to divert
to staff salaries. When benefits are
also included, the disparity in the compensation between the small and large associations
is even more apparent. At a membership
cost of $40, for example, it takes over eight thousand members to pay the total
compensation of the Executive Director of the Southern California Golf
Association.[1] It would only take slightly over 3000 members
to cover the total compensation of the Executive Director of the Oregon Golf
Association.
Table 2
Reportable Compensation of Key Employees
(2013)*
Association
|
Key
Employee
|
Total
Wages
|
Colorado State Golf Association
|
Edward Mate
|
$131,887
|
Florida State Golf Association
|
Jim Demick
|
$246,750
|
Northern California Golf Assoc.
|
Lyn Nelson
|
$247,640
|
Oregon Golf Association
|
Barbara Trammell
|
$128,890
|
Southern California Golf Assoc.
|
Kevin Heaney
|
$239,971
|
Texas Golf Association
|
Rob Addington
|
$373,177
|
* Does not include retirement,
deferred compensation, and nontaxable benefits.
A counter explanation of the correlation between association
size and salaries is large corporations pay their chief executive officers more
than small corporations so the varying salary levels at associations should be
expected. The difference is large
corporations have billions of dollars at stake and face stiff competition. Golf associations face no such threat. They own a monopoly that is almost
impossible to challenge. The executive
director of a golf association does not have to make decisions that could make
or break the association. He or she only
has to keep the governing board happy. This can usually be accomplished by giving board members a blue blazer
and outings on the better courses in the state.
The skills needed to run large or small associations are basically the
same. That leaves the size of an association
as the best explanation of salary level.
For most players, the
cost of a membership in an association is a negligible part of their golf
budget. The demand for membership will
not be very sensitive to price for these players. The price may be too high, however, for the
casual player whose golf budget is limited—the type of player that needs to be
reached if the game is to expand. Will
associations lower the cost of handicaps to attract this player? If a cafeteria plan was adopted where players
could choose “handicap only,” the revenue base of associations would be cut dramatically. This would mean a reduction in salaries and
personnel. The adoption of such a plan is unlikely since bureaucracies are
genetically predisposed to follow another basic commandment, “Do not kill the goose
that lays the golden eggs.”
[1] In
2013, the Executive director of the SCGA received $239,971 in base
compensation, $51,170 in retirement and deferred compensation, and $4,158 in
nontaxable benefits, for a total of $333,299.
Of course the big pay waits if you make it to the USGA. The Executive Director of the USGA received
$812,000 in total compensations. When an
executive goes from a state association to the USGA, he or she can expect a
salary bump of around $200,000.
