Monday, May 18, 2009

Is NP Executive Pay Getting Out of Hand?

A good friend called me last week, complaining about how his local public radio station was conducting an aggressive on-air fundraising campaign targeted to raising "at least $1 million" toward its programming. My friend was incensed because he'd looked up the executive director's salary and discovered it was nearing the $400K mark. "If this station is so determined to raise that amount of money," he said, "why can't the ED think about taking a cut in his exorbitant salary?"

Why not, indeed. There's been a debate simmering in the sector about whether nonprofit directors should be receiving salaries and benefits that some believe are just simply over the top, particularly for organizations that are not exactly drowning in funds, especially smaller and mid-sized groups. Shouldn't some of that funding be going to carrying out the mission these organizations profess to? Especially given the dire straits nonprofits are now in? Pablo Eisenberg, in the Chronicle of Philanthropy, provides a good summary of the rising compensation levels among various parts of the sector.

That doesn't mean nonprofit directors should be donning sackcloth and ashes, of course. Good and competent people should be compensated in ways that encourage and sustain talent in the sector's ranks. But the argument, which we increasingly hear, that "we have to pay top salaries to get top people" -- just doesn't fly with some of us who've seen countless folks grace the top of the roster who can claim little more than credentials that may look good on paper but don't necessarily translate into results, vision, and/or competence (something that's underrated in our sector). In short, the assumption that talent is somehow correlated with demands for million dollar salaries is a bit specious, if experience is any guide.

This growing penchant for allocating over-the-top salaries and benefits, some believe, is only going to become more prevalent as people from the corporate sector flock to nonprofits -- and boards continue to seek out and hire those who believe they're entitled to a hefty chunk of the hard-won funds that nonprofits scramble to secure.

Recently, the Montgomery City Council withheld funding from a local nonprofit that provides food to people with HIV/AIDS when it discovered that the E.D. was making more than $350K. Is that a strategy more funders should consider? I'm not sure about that but what I am sure about that this issue of compensation is going to become one that needs more discussion.

1 comment:

  1. Cindy:
    I commented on that article in the examiner, expressing what may be a relatively unpopular opinion about that situation at the food program. As I said there, I think that the public makes a link in their own minds between the mission and size of an organization and its executive pay especially when so ably aided by the executive himself as was true in this case. In response to the county's withholding of $55,000, that executive said that 8,000 meals and nutritional advisories would not be provided -- which then means to most of us who can count that if the executive were to reduce his compensation by - say - half, a full 24,000 additional meals and nutritional services would be provided to those in need.

    I think that this kind of situation, when made public does far more to suppress giving than does a cap on charitable tax deductions for the very rich. I also think that it is folly to link competence and high pay. We need only to look to national headlines for the past six months to see that particular logic painfully played out on the public stage and I think taxpayers are about done with it.