That Old Salary Discussion
When is too much too much? That seems to be the essence of a recent article/column in the Chronicle of Philanthropy (https://www.philanthropy.com/article/foundation-compensation-when-are-ceo-salaries-too-high).
The author, Craig Kennedy, a senior fellow at the Giving Review, brought forth arguments about high nonprofit CEO compensation issues. He highlighted 16 very large US foundations, including Gates, Ford, Packard, Carnegie, Mott, and Knight Foundations, as well as others, and their CEO salary structures. In particular, in a chart, he made the comparison of annual distributions of the foundation compared to their program expenses. CEO pay would be part of those expenses.
I always think it's a worthy conversation to discuss how nonprofit organizations are spending their money. They're given a tax break, based on their contribution to the community, which alleviates a large expense item based on their revenue---taxes. But nowhere in the article does it discuss the much more important question.
What are we comparing this all to?
Two decades ago, when I began at the Medical Center, my boss’s salary, the CEO, was public information on our IRS form 990. That salary could be as much as $3,000,000 per year. And I had some donors who asked about it. Also, that of the other salaries of the other senior executives. I always wanted to know why they were asking. The response was pretty consistent--is that a justifiable salary that potentially could be wasting money to be used in the organization?
And my response was always the same…Compared to what?
We tend to believe that expenses inside nonprofit organizations are terrible. A waste. When I was at the Medical Center, my boss and mentor was responsible for a multibillion-dollar budget, more than 15,000 employees, and had all the same problems that a multibillion-dollar FOR-PROFIT company had when it came to legal challenges, brand issues, balancing finances, attracting high quality employees, etc. And if you compared a for-profit company of the same size and financial scope as the multibillion-dollar Medical Center, the for-profit CEO would be making more than 10 times as much money…for pretty much the same basic work, stress, and demands.
The salary question for nonprofits isn't one that should be ignored. We should talk about it. And there are examples where salary isn't appropriate---the author of the article talks about the Bremer Trust in Minnesota and some of the self-dealing that a trustee was engaged in. But if you want to attract the best talent, the people that can be the best leaders and move an organization forward to better serve a community, it seems logical that we should pay them. And just because the organization carries a moniker of “nonprofit” does not it mean that we should be cheap, have poor leadership, and reduce the outcomes based on the fact that we don't want to pay what great talent and leadership demands.
Nonprofit work is too important not to attract the best people to lead those organizations and better serve the community.
