Could Your Charitable Donation Be Funding Fat Paychecks?
February 2009
Posted by WSJ Staff
Dow Jones Newswires’ Shelly Banjo on how donors can research pay for executives
at nonprofits
The spotlight on executive compensation, centered lately on banks seeking
government handouts, is now on the nonprofit world as donors, regulators and
legislators increasingly demand more accountability and detail from hospital
chiefs, charity directors, university presidents and other nonprofit executives.
The push for better accountability and more transparency from nonprofit
institutions is not new, but has been strengthened in a time of shrinking
endowments and donations.
Investment schemes like Bernie Madoff’s –which ensnared more than 100 nonprofits
and major donors — and compensation scandals like the United Way of Central
Carolina’s chief executive Gloria Pace King, who faced a public relations
nightmare over her $1.2 million pay package — have intensified scrutiny and
increased donor mistrust.
Defenders of current pay levels say pushing austere compensation packages could
make it harder for organizations to attract and retain top talent, especially at
such organizations as hospitals and research facilities that compete with the
private sector for employees.
Donors who are wary of their charitable gifts landing in executives’ pockets can
check out how much chief executives are making at specific charities at
charitynavigator.org, a charity watchdog group.
According to its 2008 CEO Compensation Study, more than 100 chief executives in
Charity Navigator’s database made more than $500,000. Eight CEOs earned more
than $1 million, including the president of Johns Hopkins University, William R.
Brody; the general manager of the Metropolitan Opera in New York, Peter Gelb;
and Michael Kaiser, president of the John F. Kennedy Center for the Performing
Arts in Washington.
Compensation experts say donors should also examine executive pay in a number of
different contexts. Charity Navigator offers donors four criteria donors should
use to evaluate pay:
–How does the nonprofit compare to others in its category? Executives running
education, health and arts-and-culture nonprofits can earn almost twice the
amount earned at human services or environmental agencies.
–How does the nonprofit compare to others of its size? Compensation is typically
higher at nonprofits with larger staff and expenses.
–Consider the performance of the charity in relation to the CEO’s pay and as a
percentage of the charity’s overall budget.
– Keep an eye out for charities that have given the CEO a loan as well as those
that report zero compensation. Such loans could constitute conflicts of
interest.
