Trade secrets: industry tax-exempt organizations collectively take in more than $100 million a year. Where does it go?

Circuits Assembly, March, 2008 by Mike Buetow

Other sources of income vary and are generally insignificant. A few groups--SIA, SEMI and IPC among them--generate notable fees from sales of standards, worker and management training programs, and market research activities.

Membership

By and large, trade organizations follow a similar model of encouraging membership (Table 2) through low dues. Often, as in the case of AeA, SEMI, IPC, iNEMI and others, dues are based on a progressive scale relative to the member company's annual revenues. Some associations' memberships are facility-based; others are company-wide. The range can be dramatic, however. For AeA, for instance, the cost of a regular corporate membership can cost as little as $1,000 and as much as $104,000 per year.

A typical approach would echo that of SEMI's, where corporate membership dues are low and raised infrequently. "We try not to exclude new companies and many smaller companies who might view the dues as being cost prohibitive, as we have a 'startup' category and have dues that are graduated based on company revenues," explains SEMI CFO Alfred Drumm.

Individual memberships largely drive SMTA and IEEE. The remainder of the tax-exempt organizations studied, except ACI, are primarily made up of corporate members.

'Attention to Budgets'

As part of our study, we looked at each organization's expenses. Almost across the board, revenues are rising faster than expenses, suggesting the trade groups are keeping an eye on budgets. Outliers include IMAPS, Jedec and SIA (Table 3).

This attention to the bottom line has resulted in some eye-opening jumps in assets among the surveyed tax-exempt organizations. Although ECA, which owed some $591,000 to EIA at year-end 2006, took a step back, most saw impressive gains, with IPC and SMTA leading the pack (Table 4). The median growth was 18% over the two-year span from 2004 to 2006.

Not surprisingly for service organizations, employee compensation is a leading expense (Table 5). As a percent of revenues, the range by organization was 28 to 57%, with the median 34%. Executive pay ranged mightily. The best-paid CEO, including salary, benefits and other compensation, took home nearly $1 million in 2006, while the low person on the scale pocketed about $215,000. One group is run by a management firm and does not break out executive compensation. Executive salaries are typically determined by subcommittees within the various groups' boards of directors, aided by benchmarking data. Only SEMI pays its board, allocating $1,500 each in stipends to its 34 directors.

Not all associations account for expenses the same way. Take bank fees and related charges. SMTA and iNEMI declared none for fiscal 2006. SIA and ECA claimed slightly more than $10,000 each. IPC, on the other hand, reported $175,000 in banking expenses for 2006, after declaring $193,000 in 2005, the result of hefty credit card fees. The "winner" was SEMI at $774,662; the firm operates entities in Singapore and Japan, which likely contribute to the sum. "We had one company pay its $80,000 dues on a credit card," says AeA's Palafoutas, explaining the $133,000 the organization chalked up in bank fees.