On Forbes, there was a recent article by Betsy Brill about compensation for nonprofit CEOs. There’s been outcry in the last few months over nonprofit CEOs receiving multi-million dollar salaries. Is this unreasonable, or is it justified? And what does it say about the nonprofits? The title of Betsy’s article–“Nonprofit CEOs Are Worth Every Dime“–suggests her answer to those questions. Here’s an excerpt from her article as well:
Leading nonprofit watchdog sites like GiveWell and Guidestar have called executive salaries a “red herring” in rating the effectiveness of a charity. Indeed, while it is important for donors to scrutinize the expenses of the organizations they give to, I advise against singling out any one budget line item, such as employee salaries, unless it is considered in the context of an organization’s overall operational costs and revenues. In addition, I urge donors not to reflexively become alarmed by what may seem like high executive pay. Keep in mind that the highest paid CEOs are overseeing complex multimillion-dollar ventures…
In the words of Charity Navigator CEO Ken Berger, “the most critical dimension in evaluating a nonprofit has to do with achieving meaningful results.”
This article also led me to think further about compensation, monetary and otherwise. Here was my response to Betsy’s article:
Dear Betsy, thank you for your message on compensation.
Compensation in the forprofit/nonprofit world should be based on the following —
* Value delivered to agreed-upon stakeholders (shareholders, customers; donors, community)
*Experience/Track Record leading to effective governance.
Having said that, how much should you be compensated if you achieve $150 million in sales for a forprofit company? How much if you deliver 150 pounds of food, and save 5 million lives? Do both deserve $10 million in salary?
The Nonprofit CEO is saving lives. Feeding millions of children who might not otherwise survive. Their personal life may not be existent because they are dedicating so much of their life.
How do you price that?
Is it a sacrifice? But it’s their choice. It’s their decision. Ideally it is not simply a job, but should come from a desire to serve and to give of one’s talents, strengths and heart on behalf of the community.
The Forprofit CEO is creating value for their shareholders, which is what is agreed upon. But don’t look away so quickly. A CEO provides so many other benefits within an effectively run company: benefits, healthcare and jobs which provide a living for millions of people and their families. That, too, is an investment in the community. It is not only the Nonprofit CEOS who do good and distribute wealth. Forprofit CEOs are essential to a healthy economy and peaceful world.
How do you price that?
At the end of the day, I’d say both the Nonprofit CEO and the Forprofit CEO ‘deserve’ the $10 million compensation because they are delivering so much value. However, I’d hope that both parties, of their own will, would choose to accept less. A former comment on this post pointed to this, that the money can be used to do more good.
Hopefully we find a balance. People should be compensated well. They should also be working because it is an honor, a passion and a desire for results which strengthen our community.