Is Goodwill for profit? A look at the scandals plaguing the organization

Goodwill store in Shillington, Pennsylvania

Goodwill Industries is an international organization that provides job training, placement services, and community-based programs to people struggling to find employment. The organization’s largest funding source is the over 3200 thrift stores spread worldwide. 

In 2020, Forbes reported that Goodwill earned revenues of $5.8 billion, placing it 50th on the outlet’s list of ‘The 100 Largest U.S. Charities 2021.’ Due to the closures brought by the pandemic, the 11% drop in total revenue was expected, but $5.8 billion is still a lot of cash. 

Goodwill has done plenty of good for communities worldwide, but people still look at it suspiciously – like it has a lot to hide.

Key Takeaways

  • Goodwill uses most of their earnings to fund charitable activities.
  • Some Goodwill executives have used Goodwill profits to fund exorbitant wage packages.
  • Despite earning billions in revenue, some Goodwill stores pay disabled workers below minimum wage.
  • Several Goodwill stores sell items at prices rivaling department stores like Walmart.

Goodwill’s profits are used to fund charitable services unique to various communities

Goodwill is registered as a non-profit organization: after paying administrative costs, most of its profits go to charity work. 

In 1902, Reverend Edgar J. Helms started Goodwill in Boston. Reverend Edgar and his congregation collected discarded clothes from the wealthy and hired unemployed people to repair them. The community then distributed the clothes to needy people, including those employed to mend the clothes. 

Reverend Edgar J. Helms
The founder of Goodwill, Reverend Edgar J. Helms | Courtesy of Goodwill

In 1915, representatives from a workshop mission in Brooklyn, New York, visited Boston to view the workings of Reverend Edgar’s charity, which was then called Morgan Memorial Cooperative Industries and Stores, Inc. 

Reverend Edgar convinced the Brooklyn mission to adopt his modus operandi while they persuaded him to change his workshop’s name to ‘Goodwill Industries.’ 

Goodwill uses a similar model to earn revenue, but it depends on item donations to raise money. It then calls on the community to purchase things from its shops at a discounted price. The shops provide employment, and the revenue goes toward programs that help people gain employment. 

Goodwill stores are independently run to allow stores to formulate programs unique to the problems faced by the community. For instance, a Goodwill store in Southern Arizona uses its funds to help youth obtain high school diplomas or their GED. 

The Southern Arizona Goodwill outlet recognizes that a high percentage of the area’s youth fail to complete high school. Therefore, it funds programs that remedy this issue. The Goodwill Southern Arizona website reads:

“Many charities spend a high percentage of their revenue on fundraising. However, at Goodwill, we don’t. The majority of our revenue comes from sales of donated goods in our thrift stores; Goodwill really is a community-supported organization.”

Goodwill has faced accusations of misappropriation of funds

Few can deny that Goodwill has done a lot of good for society as a non-profit organization. However, some reports claim that Goodwill masquerades as a non-profit while its top executives earn top dollar. 

A quick look at Goodwill’s websites reveals assurances that the stores funnel large chunks of profits towards charitable causes. You’ll find most stores alleging they use over 80% of the earnings to help society. 

However, some investigations have revealed that greedy executives pocket money meant for the disadvantaged in society. Henry Cordes wrote in the World Herald that Goodwill Omaha mostly used government grants to run assistance programs. 

According to Cordes, Goodwill Omaha used only $557,000 from its $4 million in annual profits to fund programs. Where did the nearly 75% of yearly profits go? Into the pockets of the top leaders, of course.

Disgraced Omaha CEO Frank McGree earned a six-figure salary, $100,000 in annual performances, a country club membership, and a $519,000 lump-sum retirement payout. Furthermore, 13 Goodwill executives were paid more than $100,000 – and it gets worse. 

After his dismissal, Frank sued the board for refusing to pay his negotiated severance. The board settled the lawsuit in 2018, paying Frank an additional $610,000. The saga stained Goodwill’s reputation as a non-profit. 

Goodwill’s non-disclosure fuels reports about questionable financial dealings

It’s notoriously difficult to investigate Goodwill’s finances. The world learned of the settlement paid to Frank two years after it happened: a confidentiality agreement prevented board members from publicly addressing the payment. 

A filing of the non-profit’s tax return in 2020 exposed the settlement’s details. Goodwill stores rarely disclose their financial information on the website; therefore, we rely on tax filings to determine how they use money. 

The non-disclosure fuels speculation that Goodwill lies about its non-profit nature. ABC 13 News found that Goodwill Industries of northwest North Carolina paid its CEO and top four vice president ‘well over six figures’ and tens of thousands of bonuses. 

The foundation also agreed to pay the former CEO $74,000 annually until his death. “It’s interesting what you find out from looking at a charity’s audited financial report,” Norma Messer, BBB Asheville $ WNC President, said. “It should be something people are aware of, and that’s how they can find in out by looking on the report, they have to include those with the salary.”

Goodwill has faced criticism for exploiting federal law to pay disabled workers below minimum wage

You wouldn’t expect an organization like Goodwill to pay below minimum wage; investigations have found it culpable of exploiting a federal law loophole that allows it to pay disabled workers below minimum wage. 

Anna Schecter of NBC News found that some Goodwill workers in Pennsylvania earned ‘wages as low as 22, 38 and 41 cents per hour.’

A federal law provision known as Section 14 (c) allows employers to obtain ‘special minimum wage certificates’ that give them the right to go far below the minimum wage limit when paying disabled workers. 

“If they really do pay the CEO of Goodwill three-quarters of a million dollars, they certainly can pay me more than they’re paying,” Harold Leigland, a legally blind worker at a Goodwill in Great Falls, Montana, working for less than minimum wage, said. 

Harold’s wife, Sheila Leigland, quit working for Goodwill after the store introduced cuts to her salary. The foundation introduced cuts to wages depending on an employee’s performance. 

Leigland was tasked with hanging 100 garments with no errors in just over half an hour, a difficult task for a blind person. “We can’t do it that quickly because we can’t look at a garment and see the size,” she said. 

For Sheila, failure was almost guaranteed, and so was an additional cut to her already low wage. “It’s not just me—all Goodwill employees deserve the same,” Sheila said. “They call themselves leaders in providing opportunity for the disabled, but since when did opportunity look like a quarter an hour?”

Chris Danielsen, a director at the National Federation of the Blind, told Country Living that organizations paying subminimum wages say they can’t afford to pay disabled workers minimum wage. However, organizations like Goodwill, making billions per year, can comfortably pay minimum wage to all employees. 

“Goodwill Industries CEO, Jim Gibbons, is a blind person,” Danielsen said. “He is drawing a salary of half a million or more while there are other blind employees earning less than minimum wage. There’s obvious irony in that.”

Goodwill executives urged communities to drive the change they want to see in their local stores

Goodwill responded by saying that though some of its stores paid disabled workers subminimum wages, the organization should be applauded for employing such workers and offering them a salary. 

Brad Turner-Little of Goodwill Industries told Country Living that it’s up to individual stores and surrounding communities to improve wages and working conditions for disabled people. 

“Those decisions around employee compensation are driven, governed, and controlled by local Goodwill organizations,” Brad said of the decisions by some stores to offer subminimum wages. 

He suggested that the communities partner with other organizations to build infrastructure to facilitate the employment of disabled people. Turner-Little said:

“That may mean providing or expanding on existing public transportation, especially in rural communities, or making sure employers have the support they need to fully integrate workers with disabilities, some of whom have certain needs on the job.”

Brad absolved Goodwill of responsibility and placed the burden of paying disabled workers fair wages on the community rather than on Goodwill, a move unexpected from a non-profit organization with a mission ‘to eliminate barriers to opportunity and help people in need reach their full potential.’

States have responded to the draconian Section 14 (c) by passing legislation to eliminate subminimum wages for people with disabilities. Delaware, Colorado, Washington, New Hampshire, Maine, Alaska, Maryland, Oregon, Hawaii, and California have outlawed subminimum wages. 

Some goods at Goodwill stores have prices similar to stores like Walmart

The allure of a thrift shop is that you buy goods cheaply while helping society and the environment. 

However, some Goodwill thrift shops have abandoned the idea of selling goods cheaply. ABC 13 NEWS found Goodwill items with price tags rivaling department stores like Walmart. 

Again, Turner-Little little absolved Goodwill of responsibility, stating that individual stores could price items however they want. “The pricing structure in stores and outlets is determined by local Goodwill organizations around what will be competitive in their particular market,” he said. 

Turner-Little added that higher prices generate greater revenue for charitable activities. 

The massive growth of Goodwill’s online platform has allowed the organization to ditch thrift shop ideals for higher-priced sales. Goodwill’s platform offers items via auction, driving up the price of commodities. 

There’s nothing unethical about raising money by selling items through an auction. However, Goodwill needs to reassure people that money goes to charitable causes and not into the pockets of greedy executives.