Non-profit CEO pay keeps hitting the fan

I had a really bad travel day on Thursday but it was a whole lot better than a bunch of non-profit executives and groups who have just been nailed to the wall by the IRS, as described in that day's New York Times. In addition to finding that dozens of organizations had failed to properly disclose executive salaries, the agency "asked 40 individuals to pay a total of $20 million in excise taxes, which is the penalty it imposes when it determines a nonprofit executive has been paid excessively."

That ain't good, even a little bit. The names of the guilty have not yet been revealed.

It is a condition of federal tax-exempt status that salaries paid not exceed a reasonable range for jobs of comparable responsibility in the local market. That has not been something which has received consistent IRS attention, in part because until the 1990s the agency had no recourse short of the "death penalty" (revoking an organization's tax-exempt status) which was obviously not a politically-plausible threat against established beloved institutions. However now the feds can impose fines and penalties such as the excise taxes noted above, against both an organization and an individual.

The above discoveries have "convinced the agency that it needed to do more in the area of compensation at nonprofits" according to the article. Yea I bet...we can add to this pile the truly-outrageous case of the chief of the Museum of Modern Art in NYC, described by Trent Stamp of Charity Navigator. The guy was already the highest-paid museum official in the U.S.A., and then two wealthy board members created a trust through which to secretly pay him millions more!

Unbelievable. I hope the state attorney general and the IRS nail all concerned to the wall. Clearly there are plenty of people in this sector who need wakeup calls.

How are our top dogs doing?

More on non-profit salaries, a couple of things were recently published regarding salaries of non-profits CEOs. The printed Chronicle of Philanthropy reported on the salaries of the CEOs of 300-plus large non-profits, finding an average in the $350,000 ballpark. The trouble is that the sample is not even vaguely representative of the staffed-nonprofit universe, it's largely university presidents and chiefs of big hospitals and so forth. What the president of Yale is paid isn't really what we mean when we ask how much "non-profit directors" make.

Charity Navigator (about whom more on another day) has assembled a more representative sample covering about 5,000 U.S. non-profits. They have this sort of data because (a) all non-profits paying any salaries of at least $50,000 must list them on the organization's annual tax return, and (b) assembling and analyzing this sort of data is what Charity Navigator does. They found an average CEO salary of $141,000. They found that CEOs of education and health-related charities earn the highest amounts; those who guide religious groups or animal-related non-profits earn the least. (Okay the religious I get, vows of poverty and all that, but animal-related? Philanthropists don't like to pay for monkey houses anymore?)

They broke the CEO salaries down by organizational budget size. Not surprisingly the two are linked (the larger the organization the more the executive director makes); for example the average top salary at non-profits with budgets under $3.5 million is less than $100,000. That squares with my own observation and experience.

To examine the question of non-profit vs. for-profit salaries, what we'd like but I haven't yet found yet is that specific comparison: how do the CEO salaries compare for non-profits and for-profits of similar size? If anyone has seen such a comparison, pointers are welcome.


P.S. Anyone who thinks that only the business world has plenty of examples of CEOs getting outrageous salaries compared to the performance or sizes of their companies should read the bottom half of Charity Navigator's report, alas.