Nonprofit Newswire | Unjustified Nonprofit CEO Compensation

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July 25, 2010; Source: Winston Salem Journal | This is one rather confusing article on nonprofit CEO salaries.  The Journal picked 10 nonprofits in Forsyth County, N.C. and found that the largest compensation went to the head of Winston-Salem Industries for the Blind ($572,533) and the smallest to the CEO of the Winston-Salem Rescue Mission ($47,471).  
The IFB CEO’s salary included a $240,000 “gains share” payment, which is apparently the equivalent of a bonus, plus deferred compensation and benefits.  The truth is that most nonprofit CEOs, as NPQ has long written, are underpaid compared to their counterparts in the for-profit sector.  But that may not justify the IFB’s hefty package—or the assertion by an IFB board chair that the CEO could be making $700,000 to $800,000 if he worked in the private sector.  

The nonprofits that train disabled persons for employment and place them in supported work environments have been the subject of several press and attorney general investigations because of the high salaries they pay compared to the low, frequently minimum or below minimum wages earned by the trainees.  The Journal made a brief comparison of the IFB with a few other programs elsewhere in the U.S. that train the blind, showing the IFB’s exec to be quite well compensated among similar organizations. 

Nonprofit executive directors needn’t contend that they could be making more money as private sector CEOs, because there’s no way to prove that.  While these type of “spot checks” may seem like they paint with too broad a brush, they are a wake up call for boards not yet doing due diligence on salary comparisons.—Rick Cohen

  • D

    As part of being a non-profit, the government should instruct boards to compensate Diretors/CEO’s & other employees at a lower salary given the fact that (1) the non-profit gets tax advantages (2) the purpose of the non profit & it’s employees is to serve it’s constituents, not themselves (3) who in America needs a $300,000 salary anyway?

  • rick cohen

    Dear D: I’m not sure I would agree. While I do think there are arguments that some have raised with some interesting reasoning regarding caps on nonprofit salaries, government has a greater vested interest–and perhaps we all do–in capping the exorbitant salaries of the private sector (salaries plus bonuses, equity, benefits, etc.) with the perverse performance incentives that led to the craziness of places like Enron and the Wall Street behemoths. Ken Feinberg as the nation’s TARP pay advisor has discovered just how out of control private sector salaries are. We need a more thorough national regime for salaries rather than having government cap nonprofit salaries and leave corporate salaries untouched.