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2007 CEO Compensation Study

The top leaders of the 5,242¹ largest charities in America earn an average salary of $145,270². This represents a modest pay raise of 2.34% over the previous year studied. All together, their salaries add up to over $730 million. Although this is a considerable amount of money, CEO compensation accounts for just 3.37% of the average organization's spending.

Geography

Just like the for-profit sector, salaries at nonprofits differ based on the part of the country in which the entity is located. Not surprisingly, the Northeast, with cities like New York and Boston, comes out on top in paying the highest average salary.

	Above Average Pay: Northeast ($179,115) and Mid-Atlantic ($151,392)
	Below Average Pay: Mountain West ($120,013), Southwest ($131,629), South ($132,530), Pacific West ($133,016) and Midwest ($135,344)

In comparison to last year's data, all but one region's CEOs experienced an average increase in pay. In the Pacific West, the average CEO compensation declined by 0.16%. Average pay increased by 3.88% in the Mountain West, 3.86% in the Midwest, 3.38% in the Northeast, 3.22% in the Mid-Atlantic, 1.71% in the Southwest and 1.28% in the South.

Charitable Mission

The compensation a CEO receives depends in part on the types of programs and services offered by the charity. And the difference in pay across categories can be significant. For example, the average CEO pay at an educational institution is nearly $140,000 more than that paid to the typical religious leader.

	Above Average Pay: Education ($234,595), Arts ($187,341), Health ($151,556) and Public Benefit ($149,989)
	Below Average Pay: Religion ($94,637), Animals ($106,750), Environment ($106,720), Human Services ($117,418) and International ($123,516)

The average compensation received by CEOs at Religion charities declined by 0.48% in comparison to last year's data. Each of the remaining categories of charities reported increases. Specifically, salaries improved by 4.60% at Animal charities, 3.71% at Education charities, 3.67% at International charities, 2.68% at Health charities, 2.17% at Human Services charities, 1.97% at Arts charities, 1.43% at Environment charities and 0.17% at Public Benefit charities.

Size

There is a predicable relationship between the size of a charity and the CEO's salary - the larger the charity the higher the average pay.

	Above Average Pay: Organizations with total expenses greater than $13.5 million ($257,956)
	Below Average Pay: Charities with total expenses under $3.5 million ($87,644) as well as those between $3.5 and $13.5 million ($142,251)

All three sizes of charities experienced increases over last year. The average CEO compensation grew by 2.99% at charities with total expenses greater than $13.5 million, by 1.15% at those between $3.5 and $13.5 million in total expenses and by 1.46% at those under $3.5 million in total expenses.

As % of Total Expenses

The top executive's pay accounts for 3.37% of the average charity's budget. The percentage varies across categories, which isn't surprising since some categories of charities tend to be much larger than others. For example, we can look at educational charities, which offer the highest average CEO compensation. This category includes large, seemingly-private institutions like University of Pennsylvania, which has the second highest total expenses ($3.29 billion) of all the charities in our database. In fact, 22 out of the top 25 charities in terms of total expenses are educational groups. As a result, these higher-than-average salaries ultimately represent a much smaller percentage of the group's budget than the typical charity.

	Above Average: Environment (5.40%), Health (4.65%), Religion (4.12%) International (3.80%), Animals (3.78%) and Public Benefit (3.51%)
	Below Average: Education (2.24%), Arts (2.70%) and Human Services (2.84%)

Biggest Paychecks

Some CEO salaries raise more eyebrows than others. The following list reveals which charity within each category pays its CEO the most.

While this list is sure to astound many donors, salaries really should be examined in the context of the charity's overall performance. Consider the following examples of well paid CEOs at charities with poor fiscal health.

• One of the lowest rated charities, the Youth Development Fund, which receives an overall score of just 2.5 out of a possible 70.0 points, pays its CEO, Richard H. Bowen, $363,100. Bowen receives an additional $19,120 from an affiliated charity.
  
• The Institute of the Americas spends more than half of its expenses on administrative endeavors, including the CEO's $260,000 salary.
  
• Although the CEO of The Association for Firefighters & Paramedics earns less than the average charity, it is hard to justify a six figure salary for someone who runs a charity that spends less than 5% of its $3.6 million budget on its programs and services.

Other Salaries of Note

When relevant, our charity reports also include information on salaries paid to top executives and Board Directors, not just the CEO. Here are some examples of compensation practices that stand out.

• The 0-star Children's Charity Fund, Inc. spends less than a quarter of its budget on its seemingly admirable mission of advocating for handicapped and disabled children. Although this underperforming charity does not compensate its president, Kenneth Bowron, it does compensate his relatives as follows: Sheryl Bowron, $62,216, Ashley Bowron, $22,575 and Kenneth Bowron Jr. $20,900.
  
• At least 60 former executives continue to be paid more than the average CEO. The following table depicts the 10 highest paid former executives.

• Of all the salaries tracked in Charity Navigator's database, the highest is the $5,658,976 paid to the president emeritus at Boston University. The second highest goes to the emeritus chancellor for health affairs at Duke ($3,938,792) and the third highest goes to the clinical professor of dermatology at Columbia University ($3,619,138).

Advice for Donors

While it is true that the paychecks of some nonprofit executives are outrageously high, this study confirms that those receiving excessive pay are in the minority. However, we recognize that many donors will be hesitant to agree that the CEO of their favorite charity deserves a six figure salary. To the skeptics, we ask that you keep in mind that the charities included in this study are multi-million dollar operations. Leading one of them requires an individual that possesses both an understanding of the issues that are unique to the charity's mission as well as business and management expertise similar to that required of for-profit CEOs. Attracting and retaining that type of talent requires a certain level of compensation - roughly $145,000 according to our analysis.

We offer the following tips to help you critique the compensation of a charity's top leader.

1. Obtain comparison data.
   Use the information provided in this article to compare a CEO's salary to other similarly sized charities, as well as those in the same category and region. Charity Navigator registered users can compare the CEO salaries of specific charities on their "My Charities" page and on each charity's rating page by clicking on the "Compare These Charities" link. Registered users can also access Charity Navigator's "Sector Analysis" tool to calculate the average CEO pay by cause and state.
2. Be skeptical of charities that report zero CEO compensation.
   There are very few individuals that can afford to work full-time managing complex, multi-million dollar organizations without receiving any compensation. If a charity you are considering reports no salary for its CEO, then we recommend you contact it directly- using the information we provide- to learn how it has been able to attract and retain a competent leader without paying that individual. It might have a legitimate answer. However, most likely the charity failed to appropriately report the CEO's salary to the IRS or respond to our analysts' requests for that data.
3. Consider the performance of the charity in relation to the CEO's pay.
   If you come across a charity whose CEO pay is higher than other similar charities, don't immediately dismiss that charity's request for funding. You're better off supporting a charity that is fiscally efficient, achieving its programmatic goals and paying its CEO well, than a charity that has substandard fiscal health, fails to live up to its mission, but under-pays its CEO.
4. Be cautious if the charity has given the CEO a loan.
   While it can be difficult to ascertain, if you do learn that a charity's top leader received a loan, you should think twice about supporting that charity. We maintain that a charity isn't in business to provide low or no-interest loans so its CEO can move into an exclusive neighborhood or purchase a new, luxury car. If the CEO's compensation is reasonable, then why does he/she require a discount loan to work for that charity?

¹All data is based on the 5,242 charities in Charity Navigator's database as of July 2007.

²Based on the data found in each charity's most recently filed Form 990, we include salary, cash bonuses, and expense accounts when we measure a CEO's compensation. We do not include contributions to benefit plans or deferred compensation.