Non-Profit CEO Salary Caps: Setting the Stage for Failure?

Last week we all saw non-profit CEO salaries scrutinized in the New York Times. I know this has been an ongoing debate for years and, yes there have been some exorbitant salaries that should make CEOs blush. The debate here is extremely valid and one that deserves careful thought and consideration. Seeing a non-profit CEO compensated upwards of $900,000 can raise eyebrows, but for a non-profit that improved efficiencies and fundraising last year during a global economic downturn, it seems quite fair. I, quite frankly, have a bigger issue with the CEOs in corporate America who were compensated tens of millions of dollars in 2009 (stock and salary) for running companies that lost millions if not billions of dollars.  Yes, people complained about this too, but compensation is a decision that the marketplace and/or donors should influence not the government.

I understand that donors would argue they don’t want their contributions funding CEO salaries and administrative costs, and they want to see funding go directly to the cause itself, but donors need to understand that there is a reason a specific organization is more efficient or more successful than others - leadership and talent.   People working in the nonprofit space work just as hard as those in corporate America – why shouldn’t they be compensated for it?

I am a donor and have relatively extensive insight into many NGOs from the opportunities I’ve been given throughout my career – and I can’t help but be fearful that these CEO salary caps are going to do more damage than good. What good can come from having an underpaid CEO and, subsequently staff, running an NGO?

It ‘s been stated several times over that we are in a time of change – a time where businesses need to operate differently, where governments need to govern differently – well, we are also in a time where innovation and creativity are desperately needed to rejuvenate the non-profit sector. Non-profits need to attract top talent – and simply stated, talent goes where the money is.

These salary caps inherently and immediately devalue the role of a CEO at a non-profit. Look, not everyone can afford to take a $1 salary for their work at running an NGO – and why should they? Why should a person who runs a multi-million dollar international non-profit be valued less than someone who runs a multi-million dollar international corporation? Not only are the CEOs at major non-profits doing work that is just as significant as – if not more than – corporate CEOs they are also often working in regions that no corporation would dare enter. These CEO’s are being paid because they are running an efficient organization and making an impact; I feel that should, and needs to be rewarded.

It brings me back to college when I did some wonderful work with Allen Hall Public Relations, the Muscular Dystrophy Association and the Girls Scouts. It was extremely rewarding and at the end of the day my efforts helped very deserving and local causes. I strongly considered keeping along that vein of work after college, but I was repeatedly told that there was “no money in non-profit.” That if I wanted to make a difference and a living I was going to have to find a different way. I consider myself extremely fortunate that I have found a career path that has landed me in a position where I can do both.

I do believe there should be reasonable limits for non-profit CEO compensation– but let the market and donors decide, not the government.

ABOUT THE AUTHOR: As part of Waggener Edstrom Worldwide’s Social Innovation Practice, Kerry Johnson’s focus is geared toward creating issues awareness and education amongst consumers, employees, government, and industry leaders.  Since joining WE, Kerry has worked with global clients to develop, communicate and raise the visibility of citizenship programs. Recently, she managed the launch of a global health program in six countries throughout Africa and Asia; providing strategic counsel for executives as well as streamlining communications between the grant recipients, corporate offices and the in-country teams. In 2009, Kerry traveled to Beijing to share information about the current state of corporate social responsibility in the U.S. and to learn more about the industry’s landscape in China. In addition, she lead the production of WE’s first CR Report.

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