September 2, 2004

Mr. Tom Smallwood

950 Katherine Drive

Elm Grove, WI 53122

Dear Tom:

I have had an opportunity to speak with two consultants and some FFOG members regarding compensation studies and am prepared to discuss this with you so we can move forward on this project.

The consultants are Jim Moss of PRM Consulting and Elaine Lasnik- Broida of the same named firm. Jim Moss is located in Washington, D.C. He was referred to us by John Linton of Towers Perrin. Jim was formerly with Towers Perrin but spun off his activities when the firm decided to wind down its consulting practice with tax exempts. Jim's specific asset is that he provided consulting services to the Irvine Foundation's attorneys. Elaine Lasnik-Broida is located in California. She was referred to me by FFOG members. Elaine's asset is that she has built a healthy practice among FFOG members that participate in her firm's annual surveys. Marketing materials for each firm are included.

In speaking to FFOG members and the consultants, I have found that consulting studies are part science, part art. While the study is scientific, there are variables in structuring the study. It is those variables that we should discuss. I have thoughts on all of them. I will list those variables below so that you will have some time to think about them before meeting.

•	Who should the study cover? Mike Grebe and I determined that executives and board members should be covered. We could also include program and other staff.

•	Should we request a study using a named group of comparable foundations? If so, we must select the group. The other option is to use databases for comparables.

•	Do we want an intermediate sanctions study?

•	What is the Foundation's compensation philosophy? The philosophy states, for example, who the Foundation competes with for employees, protocols for benchmarking, where in the salary range does the Foundation chooses to compensate employees. The philosophy is unique to each foundation and is key to supporting compensation decisions, in the event examining authorities were to inquire. The consultants provide assistance in establishing a philosophy.

•	Do we want to establish a frequency for future studies?

•	What type of budget should be established? Who should we hire?

I will follow up with a call to set up a time to discuss. I would like to discuss this next week if your schedule permits. I appreciate your assistance on this project.

Very truly yours,

Cynthia K. Friauf

CKF/ye