Nonprofit Compensation

It is often a controversial subject and this Interview in the Nonprofit Quarterly examines it.

An excerpt.

“Jon Pratt: Recently, Charities Review Council of Minnesota conducted a public opinion poll that asked 800 people in Minnesota to pick a statement that best described their view of nonprofit pay. The choices were:

“Employees of charities should receive wages comparable to for-profit employees” (42 percent agreed);

“Employees of charities should receive wages comparable to for-profit employees” (42 percent agreed);

“Employees should be paid less than their for-profit counterparts but enough to earn a living” (34 percent agreed);

“Employees should be drawn to their work out of a commitment and paid no more than a stipend” (14 percent agreed); and

“Don’t know” (10 percent agreed).

"What do you think these responses say about the public’s understanding of nonprofit compensation?

“Paul Light: Well, it suggests that 42 percent, or a substantial minority of Minnesotans, believe that nonprofit employees deserve a fair wage, and that’s a positive. But when you get to the next group that says they should be paid less, and to the group that says no more than a stipend—which, combined, is the majority—it demonstrates a real problem. There may be an element of the “vow of poverty” theory among the ones who think this way. And I’ll bet if you had asked the whole group whether executive directors should be paid the same as corporate CEOs, the answer would have been emphatically no!

“But your survey pretty much reinforces the results of a survey I conducted in 2008 with a national sample, where we asked, “Do you think that the heads of charitable organizations are paid too much, too little, or just right?” The number who said “too little” was 4 or 5 percent; the number who said “too much” was in the high 40s. The 40 percent who say “too much” has been pretty steady over time, suggesting that many Americans believe that employees of charitable organizations should take a discount or pay cut because they’ve signed on to help others.

“JP: A frequent comparison group for reasonableness of nonprofit compensation is government pay scales, where civil service systems and public oversight bodies have developed very transparent structures of grades, ladders, and steps. Government compensation has been a major news item in 2011, with a wave of freezes, reductions, and public criticism of government salaries, pension benefits, and collective bargaining rights for public employees. The governors of Wisconsin, Ohio, Indiana, and New Jersey each made this a major issue. What do you see as the implications for nonprofit compensation?

“PL: Most of the public says that federal employees are just paid too much, and there’s a lot of false information out there about that, based on averages of what federal employees get versus what private employees get. The gross generalizations fuel the public’s notion that the federal government wastes a great deal of money, which is built on anger toward Washington and toward government in general.

“JP: Congress and the IRS have increased attention on nonprofit compensation. Nonprofit organizations with employees paid more than $150,000 are required to provide supplemental information about compensation on Schedule J.

“PL: It’s a frustrating paradox that Congress doesn’t care very much about how much private CEOs—corporate CEOs—make. Basically, if it’s in the private sector, we’re not going to worry too much about it. But if it’s in government or nonprofit-land, it is fair game.”