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.

Bigger than transportation or finance, and spreading

If you're a non-profit manager about my age (let's just say 40-something and leave it at that), maybe you share my distinct impression that this sector is bursting out all over in the U.S. The researchers at John Hopkins have crunched official detailed employment data and the numbers agree that paid employment in private non-profits is booming.

For example more people are employed in private not-for-profit organizations than in transportation or in finance and insurance combined. Non-profit employment is now more than 8 percent of all private employment nationally, and rising: in a sample of five states for which they analyzed the state further, non-profit employment from 1995 to 2003 rose at triple the rate of total employment.

There are clear regional differences: private non-profit employment basically rises (as a percentage of all jobs) as you move west to east across the country. The sector "has tended to be concentrated in urban areas," but "the concentration of nonprofit employment in urban centers is changing. Like the population generally, nonprofit employment is growing rapidly in suburban areas....nonprofit job growth in the suburbs has not only been faster than that in the cities, but it has also been faster than private job growth generally in the suburbs."

This is the same data that informs the researchers' conclusion that the non-profit wage gap (that people get paid less for the same work at non-profits than at for-profits) is at best a half-truth. More of their reports on non-profit employment, including state-by-state breakdowns, can be found here.

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.

Non-profit wage slaves

The non-profit sector as a profession is terrific, provided you're willing to sacrifice a bunch of earning power. That's just the facts...I think. Until recently I was certain of it, as is everyone I've ever met in the field. But those pedantic so-and-so's at Johns Hopkins University -- the world's largest and best-funded research center on the non-profit sector -- insist that we base this sort of conclusion on real-life data. And they have the nasty habit of actually finding and analyzing such data.

I'm not yet conceding that a lot of us wouldn't be paid more doing the same level of work in the business world. But smart people who have examined excellent data are finding that the idea that non-profit wages lag behind for-profit counterparts is "at best a half-truth." Now it would be easier to dismiss that counterintuitive finding except that Lester Salamon has written or edited several excellent books on the "civil society" both in the U.S. and worldwide, two and half of which I've read. There is probably literally no one in the world more knowledgeable about the subject.

That paper linked above is only a couple of pages long and worth the read. Salamon and company, from examining a newly-available level of employment data, found two trends: that while average non-profit wages overall do lag behind for-profit wages, and by smaller fractions than I would have guessed, when the two are compared in sectors where they go head to head non-profit wages are actually a bit higher (!).

Um. As they say out where I went to college, yougottabefrickinkiddinme. More thought required is here, and perhaps more information. A quick hunt did not turn up any non-anecdotal data saying otherwise...pointers are welcome. This subject will return.