The CEO of my favorite nonprofit earns more than $200,000. Is that outrageous?

Advice on how to make the world better.
June 17 2009 10:30 AM

Charity Fat Cats

The CEO of my favorite nonprofit earns more than $200,000. Is that outrageous?

Do you have a real-life do-gooding dilemma? Please send it to ask.my.goodness@gmail.com and Patty and Sandy will try to answer it.

Dear Patty and Sandy,

For a few years I've been donating to two charities, Heifer (an organization that fights hunger and poverty by providing needy families with livestock) and ACCION International (a microfinance organization committed to poverty alleviation). I believe in their missions and checked them out on Charity Navigator before making my first donations.

I was getting ready to make another annual donation recently and decided to check up on them again at Charity Navigator. I happened to see the CEO's salary for Heifer was in the $200,000 range, and I have to admit I was offended. So, as a comparison, I reviewed the CEO's salary at ACCION International and found that it was also around $200,000.

Am I somehow naive and unworldly for viewing these salaries as objectionable?

—Lester

Patty:

Are you unworldly? Absolutely not. These are two extraordinary organizations doing great work and advancing ambitious goals in very difficult settings, yet you continue to poke around and look for more information on them to ensure your funds are well-spent. I admire that; more people should be so wise about their giving!

Illustration by Mark Alan Stamaty. Click image to expand.

Are you naive about pay levels? Possibly. Everything has a market price, and nonprofit CEOs are no different. From what I know of the nonprofit sector, these two executives appear to be in a very reasonable pay range. The size and complexity of their organizations and breadth of the CEO's responsibilities (including fundraising and public duties) require their boards to search for the best candidate in the market. There are hundreds of nonprofit CEO jobs open every year, and these organizations want to attract and retain a great leader. The cost of unexpected turnover at the top can be very high—not only in lost productivity but in lost fundraising and, most important, in lost impact. The best nonprofit executives I worked with had all the skills to make three times as much in the private sector, but they enjoyed the "psychic income" of being in jobs they were passionate about. For the right CEOs of these two great organizations, a $200,000-plus salary seems reasonable to me. 

Sandy:

If our inbox is any indication, this is a perpetual concern for donors: Why am I donating my hard-earned cash to an organization whose CEO is raking it in? I don't think your objection makes you naive and unworldly, but I do think you should look at these salaries in context.

The 2008 Charity Navigator CEO Compensation Survey found that the average executive salary among the charities it evaluates is $149,972. The CEO of Heifer has a listed salary of $236,881; the CEO of ACCION International, $210,000. While those are above average, both organizations are particularly large charities with significant assets. As a percentage of overall expenses, the CEO salaries are actually very low. (Of all nonprofits evaluated, the average CEO's salary made up 3.32 percent of expenses; Heifer's made up 0.25 percent and ACCION's 1.58 percent.) To really put the salaries in context, imagine what these CEOs could make leading similarly sized organizations in the for-profit sector. The average compensation of a CEO at one of the S&P 250 companies is $11 million!

Like you, I want my donations to go to well-run, mission-driven, efficient organizations (such as ACCION International or Heifer). But I also realize that in order to get and retain talented staff and leadership, you need to offer competitive salaries. Looking around at my friends and colleagues in the nonprofit world, I worry that many of them will leave for better-paying careers elsewhere. And my fears aren't unfounded: A 2008 Meyer Foundation survey found that 69 percent of emerging nonprofit leaders feel underpaid for the work they currently do; and 64 percent have financial concerns about committing to the nonprofit sector in the long run.

By setting salaries below market value, we not only risk losing talented leaders—but we also risk losing diversity. If nonprofit jobs don't pay enough to allow people to pay off their student debt, purchase a home, send their kids to college, and save for retirement—then all the "psychic income" in the world isn't going to help.

Do you have a real-life do-gooding dilemma? Please send it to ask.my.goodness@gmail.com and Patty and Sandy will try to answer it.

Patty Stonesifer is the chair of the Smithsonian Institution Board of Regents and a senior adviser to the Bill and Melinda Gates Foundation, where she was president, then CEO for 10 years. She spent the first two decades of her career in the technology business, where her last job was senior vice president at Microsoft.

Sandy Stonesifer works on issues related to adolescent girls' health at a nonprofit based in Washington, D.C.

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