Charity Navigator Releases Study of CEO Compensation

Evaluatingthe reasonableness of compensation paid by charities to their executive officersis, of course, essential to determine compliance with Internal Revenue Codesection 501(c)(3)’s prohibition against private inurement of net earnings andto avoid excise taxes under Code section 4958 (in the case of public charitiesand section 501(c)(4) entities) and Code Section 4941 (in the case of privatefoundations).  A helpful resource for evaluating executive compensationis Charity Navigator’s recently issued annual study of charity CEO pay,available here.  Among the more interestingfindings highlighted in the accompanying press release are these:

Modest raises are the norm since therecession: Salaries for the CEOs in thisstudy increased modestly since the recession: just 0.8% from 2008 to 2009 and1.5% from 2009 to 2010 and 2.5% from 2010 to 2011.  These fairly smallincreases come after the 4.7% median increase charity CEOs received from 2007to 2008.

 

Charity CEOs that aspire to have bigsalaries are more likely to succeed if they work at an Educational charity: The data shows that top pay at charities can vary greatly bymission with the heads of Educational charities earning as much as $90,000 morethan those running Religious charities.

 

Geography influences the topexecutive’s salary: CEO salaries at nonprofits reflectthe regional variation in the cost of living.  For example, CEOs atcharities in the Northeast ($149,523) and Mid-Atlantic ($147,474), whichinclude Boston, Washington D.C. and New York, tend to earn higher salaries,than those in the Mountain West ($108,893) and Midwest ($114,050), whichinclude Milwaukee, Boise and Salt Lake City.  

Notably,the study concludes by acknowledging “thatthe paychecks of some nonprofit executives are outrageously high,” butconfirming “that those receiving excessive pay are in the minority.”

JRB