Dairy Management's CEO defends receiving $1 million pay while dairy farmers struggle to survive

Cary Spivak
Milwaukee Journal Sentinel

The top executive at the marketing group dairy farmers are required to fund is defending his pay — routinely around $1 million — though he acknowledged struggling farmers may question the size of his paycheck.

“It’s very hard for farmers who are in these economic times to look at salaries and not question it," Thomas Gallagher, CEO of Dairy Management Inc., said in an interview with the Farm Journal's MILK.  

"They certainly have a right to question it.”

In 2014, Thomas Gallagher, second from right, of Dairy Management Inc. announced more than $500 million in fluid milk partnerships with seven major companies. The effort was  launched to reinvigorate fluid milk sales, with special emphasis on extended shelf life and shelf stable fluid milk products that would be available when and where consumers want them.

Gallagher was interviewed by the trade journal after the Milwaukee Journal Sentinel reported last week his pay exceeded $1 million three times from 2013 to 2017.

Gallagher, 67, was paid $899,810 in 2017, according to documents nonprofit groups are required to file with the IRS. All told, the top 10 Dairy Management executives were paid $8 million in 2017, the most recent year for which data is available.

Included in that group was former U.S. Secretary of Agriculture Thomas Vilsack, who joined Dairy Management days after he left the White House. Vilsack was paid $800,557. 

That same year, 1,600 dairy farms, including 503 in Wisconsin, closed amid a lingering crisis fueled by years of low milk prices and other factors.

Gallagher rejected repeated Journal Sentinel requests — and a two-week window — for an interview before the publication of the story. Instead, a Dairy Management spokeswoman answered questions via email.

During a phone interview, Vilsack told a reporter it was "insulting" to ask him about his pay and his move from cabinet secretary to the group.

Dairy farmers are required by federal law to pay 15 cents per hundred pounds of milk sold into the dairy checkoff program, which is overseen by the USDA.

Ten cents goes to state and regional marketing programs, such as the Dairy Farmers of Wisconsin. A nickel goes to national programs, such as Dairy Management, which has annual revenue of about $160 million.

There are nearly two-dozen checkoff programs covering everything from farmers producing honey or growing Christmas trees to cattle ranchers and pork producers.

The payments are mandated by Congress. Bills to make the payments voluntary and to increase transparency in the programs have been introduced but not passed. 

One pending bipartisan measure is co-sponsored by Sen. Mike Lee, R-Utah, Sen. Rand Paul, R-Kentucky, and two Democratic presidential hopefuls, Elizabeth Warren of Massachusetts and Cory Booker of New Jersey.

"Sen. Lee believes farmers ought to have the right to know exactly how the checkoff dollars they are forced to pay are being spent," a spokesman said in an email to the Journal Sentinel.

The checkoff programs collected a combined $895 million last year with nearly half of that amount — more than $420 million — coming from dairy producers. 

Dairy producers also pay more than other farmers, the Journal Sentinel investigation found. They pay about 80 cents per $100 sold into the program — twice what pork producers pay and more than 10 times what beef producers pay.

“I can certainly understand (dairy) producer concerns, particularly at a time when we are in very difficult economic times for dairy farmers and for the dairy culture in general," Gallagher told the Farm Journal's MILK in an article posted this week.

In the article, Gallagher defended his pay saying farmers "have to rely on the other farmers that are elected to these boards to look at the data and say, look, we’re competing with and working with the largest food companies in the world. If you want to do that, you have to have the people with the talent and decades of experience to do that.”

Members of the 81-person Dairy Management board are appointed by the U.S. secretary of agriculture or named by regional bodies that receive checkoff dollars.

"Anybody who has ever looked at compensation in any business, you compare the job you’re looking at to comparable jobs in terms of budget size, impact and a number of factors," Gallagher told the publication. "And that’s what our board does.”

Pay packages reported to the IRS include salary, bonuses, retirement, deferred compensation and other benefits.

Gallagher's pay in 2015 and 2016 was more than twice the median paid to CEOs at large nonprofits those years, according to Candid, formerly known as GuideStar, a group that analyzes nonprofits.

He was paid $1.36 million in 2015 and just over $1 million in 2016.

Contact Cary Spivak at (414) 223-5467 or cspivak@jrn.com. Follow him on Twitter at @cspivak or Facebook at facebook.com/cary.spivak.

To read Dairyland in Distress, an examination of the factors behind the dairy crisis and its toll on farmers, go to jsonline.com/dairycrisis.