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Are Nonprofit CEOs Overpaid?

Charity Navigator's In-Depth Compensation Study Finds That the Majority Are Not

 
 

GLEN ROCK, N.J., October 3, 2014 –The typical charity’s chief executive officer received a low to mid six figure compensation package, according to Charity Navigator, the nation’s leading charity evaluator and donor advocate. And the typical CEO saw their compensation increased just 2.6% over the prior year.

The study examined CEO compensation at 3,946 mid to large-sized charities in America to help donors, policymakers, charity Boards and others understand how leadership pay varies by the charity’s location, size and mission.  Findings from the report include:

  • Modest raises are the norm since the recession: Salaries for the CEOs in this study increased modestly since the recession: just 1.5% from 2009 to 2010, 2.5% from 2010 to 2011, and 2.6% from 2011 to 2012.  These fairly small increases come after the 4.7% median increase charity CEOs received from 2007 to 2008.
     
  • Charity CEOs that aspire to have big salaries are more likely to succeed if they work at an Educational charity than a Religious charity: The data shows that top pay at charities can vary greatly by mission with the heads of Educational charities earning as much as $74,000 more than those running Religious charities.
     
  • Geography influences the top executive's salary: CEO salaries at nonprofits reflect the regional variation in the cost of living. For example, CEOs at charities in the Northeast ($148,250) and Mid-Atlantic ($141,907), which include Boston, Washington D.C. and New York, tend to earn higher salaries than those in the Mountain West ($101,589) and Midwest ($108,687), which include Milwaukee, Boise and Salt Lake City. 
     
  • The bigger the charity’s budget, the bigger the CEO’s wallet: Not surprisingly, the higher the charity’s total expenses, the more likely it is that the CEO will earn higher compensation.  Charities with over $200 million in total expenses report a median pay of $526,679 for their CEOs whereas charities with $1 - $3.5 million in total expenses report a median pay of just $97,158.
     
  • Mission, location and size also impact the CEO’s raise: Leaders at charities in the Southwest (3.2%), those focused on Animal issues (3.5%) and those at larger organizations (3.9%) received the greatest median raises.  In contrast, CEOs at charities in the South and Mountain West (2.0%), those working at Religious charities (0.4%) and those running smaller organizations (2.0%) received the lowest increases in pay.
     
  • While most nonprofit leaders earn reasonable salaries, a handful earn excessive wages: 12 of the charities in the study reported that their CEOs receive more than $1 million in compensation (this includes one-time payouts).  That’s up from calendar year 2011 when 9 charities in the study had CEOs that received at least $1 million in compensation.
     
  • There are still some charities that report they essentially set their CEO’s pay in a vacuum of information:  Nonprofit Boards should have a documented policy for establishing the CEO’s pay.  That objective process should include a review of the CEO performance and benchmarking against comparable organizations.  191 charities in this study reported that they don’t have a policy in place for determining their CEO’s pay.  The good news is that this is down from last year when 244 charities reported that they didn't have a policy for setting their CEO's salary.


"If a charity follows good ethical best practices, is financially well managed and is focused on delivering on its mission, then we urge donors not to discount such charities simply because the leader's pay is in the low to mid six figures. Our extensive research shows that this is the level of compensation required to attract and retain bright, able, and committed leaders at mid to large sized charities" said Charity Navigator, president & CEO, Ken Berger. “At the same time, we also urge donors to be wary of charities that pay salaries hovering near or above one million dollars. The purpose of a charity is to provide a public benefit. Every donor and tax payer subsidizes the charitable sector with that purpose in mind, not creating a class of millionaire CEOs.”

CEO compensation includes salary, cash bonuses and expense accounts, but not contributions to benefit plans or deferred compensation that is allocated to be paid in later years.  The data for this report was gathered from the charities’ Forms 990 (annual informational tax filing) for the fiscal year ending 2012.

About Charity Navigator (www.charitynavigator.org)

Charity Navigator is the largest expert charity evaluator in America and its website attracts more visitors than all other charity rating groups combined. The organization helps guide intelligent giving by evaluating the Financial Health and Accountability & Transparency of ~8,000 charities. Charity Navigator accepts no advertising or donations from the organizations it evaluates, ensuring unbiased evaluations, nor does it charge the public for this trusted data. As a result, Charity Navigator, a non-profit 501 (c) (3) organization itself, depends on support from individuals, corporations and foundations that believe it provides a much-needed service to America's charitable givers. Charity Navigator, can be reached directly by telephone at (201) 818-1288, or by mail at 139 Harristown Road, Suite 101, Glen Rock, N.J., 07452.

To access the complete study, including tips to help donors evaluate CEO pay, visit: http://www.charitynavigator.org/ceostudy

Contact:
Charity Navigator
Sandra Miniutti
Media@charitynavigator.org  
201.818.1288 x105

 

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