January 23, 2012; Source: Forbes
The salary levels of nonprofit CEOs have come under fire quite a bit in recent years. Scandals at a variety of organizations around the country and revelations of multi-million dollar pay levels at some organizations have shocked some people. In fact, as NPQ recently noted, several states are considering or enacting legislation to regulate the pay scale of senior execs at organizations that are receiving government funding. Now comes Forbes with an article asking the question of whether or not a $1 million salary is too high for a nonprofit CEO. The article states that there are two ways to look at this issue.
On the one hand, it is hard to justify a CEO receiving that much in pay when the revenue streams come from the generosity of donors or from the public’s taxes or both. This is the argument advanced by Gov. Andrew Cuomo’s (D-N.Y.) regarding legislation in the Empire State to limit nonprofit hospital CEO pay. On the other hand, as the Forbes article points out, it is a common line of thinking in for-profit businesses that you have to invest to get the best talent. Is there any reason why the “You get what you pay for” argument wouldn’t hold true for nonprofits?
What are the measures of success here? It may be that a very highly paid exec is doing a great job bringing in revenue. Isn’t it also possible that a highly paid executive will implement efficiencies in delivering on the organization’s mission at reduced costs?
Should we use a rubric like the one in baseball in which a player is judged by how many wins the team would have had with him versus without him? Applied to nonprofits, one question might be how many donations would be received or not received if the highly paid exec were not there. Or should we just let the court of public opinion decide? To address these questions, the Nonprofit Quarterly recommends relying on more than just one measure. Take a look at this 2006 article by Linda Lampkin titled “You’re Paying What? How to Set Executive Compensation.”
Putting the Forbes question into context, however, one wonders if this isn’t a little bit of a tempest in a teapot. The 2012 Charity Navigator survey found that of the nearly 4,000 charities surveyed, only six paid their top executive more than $1 million, down from 14 at that level in 2008. Only 65 charities in the survey paid salaries between $500,000 and $1 million, down from the 106 in 2008. –Rob Meiksins
CORRECTION: An earlier version of this article inadvertently referred to New York Gov. Andrew Cuomo by his father's name, former New York Gov. Mario Cuomo. NPQ regrets the error.