July 01, 2008
The Compensation Debate
The compensation and retirement package for Gloria Pace King, president of the United Way of Central Carolinas, in Charlotte, N.C., has prompted a debate about whether salaries of nonprofit executives should mirror those of for-profit executives.
Ms. King’s compensation was $1.2-million in the fiscal year ending June 2007 and included more than $822,000 in retirement benefits, reports The Charlotte Observer. The United Way’s board chairman told the newspaper the retirement payments were larger than usual because the organization discovered it had not paid the appropriate amounts since 2000.
Tom Durso, a nonprofit communication consultant, writes on his blog, the 501c3 Files, that some nonprofit workers believe the strength of a group’s mission should “obviate the need to dangle big paychecks to attract talent.” But on the other hand, he says, some people believe that “because nonprofit heads perform essentially the same duties as their for-profit siblings, it’s fine to increase pay packages to lure effective leaders.”
The story has also been the topic of debate on Philanthropy Today, The Chronicle’s daily summary of news about the nonprofit world.
One commentator writes that “With examples like this of outlandish and frivolous use of donor funds, it’s no wonder why some people have lost confidence in the ethical oversight and distribution of philanthropic giving in our culture.”
However, another reader says higher pay is necessary for nonprofit workers, especially in attracting young people to nonprofit work.
“I still believe that the compensation for nonprofits must come much closer to mirroring the private sector, not only for the exec’s but also for the staff,” he writes. “Right now, here in Silicon Valley, there is a push for individuals to major in nonprofit majors. Charities/nonprofits are looking more and more to the young, educated, prime-time in their career, talent. These workers will not venture in the nonprofit arena without compensation somewhat closer to the private sector.”
What do you think? Should nonprofit groups try to pay their executives salaries that are competitive with private businesses in order to attract top talent? Or is this a misuse of donations? Share your thoughts by clicking on the comments link below.
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The NC UW Board Failed Both the “Smell Test” and the “Optics Test”
I don’t fault the CEO one bit, if any employee was asked “We plan to increase your retirement fund by sixfold, what do you think?”, the answer of course will be “Great idea, Thanks!”
The failure here is for the NC UW board to not recognize the negative impact that this would have on the non-profit sector. Don’t they know the United Way history with the Aramony scandal?
If she was owed 8 years of back retirement fund payments, that should have been handled separately as an error correction, not a sixfold increase in her retirement account in one year.
BTW, The Combined Federal Campaign (CFC) is the world’s largest workplace giving and there are many safeguards in place to prevent the type of coercion and pressure mentioned in some of the other posts.
It is also the most donor friendly, and least expensive way for a charity to raise funds.
In terms of actual giving, if the CFC were a foundation it would be the 10th largest foundation in the US. $1 billion of unrestricted gifts over the past five years — how much did your non-profit receive?
Bill Huddleston
CFC Expert
www.cfcfundraising.com
— Bill Huddleston Jul 1, 02:33 PM #
It seems to me what is missing from this debate is an analysis of what social outcomes donors get for hiring executives of varying pay scales. Donors give money to charitable organizations presumably because they expect a certain level of social outcomes per dollar. The debate then should be about what social value per dollar each member of an organization provides. If paying non-profit executives (or any member of an organization) better, more competitive salaries makes an agency proportionally better at providing social good, then the investment in human capital is positive for society as a whole.
Therefore, the focus on nominal salary’s misses the point. The point instead should be on outcomes measurement and how much good-per-dollar an organization can provide. What beneficiaries of social services and the people that fund the organizations care most about is helping those in need, not policing the salaries of non-profit professionals to ensure they are compensated less than their private sector counterparts.
David Henderson
CEO, Idealistics Inc.
www.idealistics.org
— David Henderson Jul 1, 10:10 PM #
The number of nonprofit executives who make millions are few compared to the number you can find in the business world. If anything, I’m more bothered by the gap between the high and low end of the payscales in the private sector, where the lowest-paid employee might be an outsourced or undocumented worker making $2 an hour. I sincerely doubt that the corresponding gap at any nonprofit even comes close to that level of inequity.
— Katie Jul 2, 02:44 PM #
To add to what Katie is saying: overpaid executives, even at failing companies, are a scandal in the for-profit world. Do we really want to mimic them in the nonprofit sector?
— Dennis Fischman Jul 2, 04:01 PM #
I think that one of the big problem in our society is we don’t pay people appropriately for the work that they do. Our teachers, religious leaders, nonprofit staff, etc. all are paid extremely poorly. What happens? Well those that are really good at what they do get picked off by larger organizations or other industries all together. I definitely think there needs to be a balance but overall I think the scale is turned upside-down.
Jason Dick
www.ASmallChange.net
— Jason Dick Jul 26, 12:21 PM #