How High Should a Non-Profit CEO's Salary Be?

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As the weather in New York creeps ever warmer, the protestors of Occupy Wall Street have re-emerged, as they continue to highlight economic inequalities through the 1% versus 99% framework.

 

That the compensation packages of CEOs of public companies in America has exploded in the last few decades is nothing new. Viacom (VIA) CEO Phillip Dauman’s 2010 compensation was worth a princely $84 million while Starbucks (SBUX) honcho Howard Schultz took home a not-too-shabby $21.7 million in the same year. Apple (AAPL) head Tim Cook’s 2011 take is estimated to be about $378 million, thanks largely to a grant of restricted stock units. But what have thus far escaped public scrutiny is the salaries of leaders at non-profit firms.

 

It turns out that CEOs at non-profits can also sit comfortably amongst the nation’s top 1% of earners, even if their salaries don’t quite reach the astronomical level of Dauman’s. One such CEO, highlighted in this week’s Village Voice cover story, is Dr. Alan Morse, who leads the New York-based Jewish Guild for the Blind.

 

According to the Voice, Morse’s total compensation for 2008 was $843,502 and for 2009, when the Guild was $5 million in the red, Morse raked in some $1.5 million. At least when Citigroup (C) was bleeding, CEO Vikram Pandit volunteered to take a $1 salary until the firm became profitable again. Meanwhile, a music therapist earning less than $5,000 a year at the Guild was laid off.

 

There’s no doubt that CEOs working for non-profit firms deserve competitive salaries. Talented executives could always head to for-profit companies otherwise.

 

As Patty Stonesifer, chair of the Smithsonian Institution Board of Regents, explained to SlateThere are hundreds of nonprofit CEO jobs open every year, and these organizations want to attract and retain a great leader. The cost of unexpected turnover at the top can be very high -- not only in lost productivity but in lost fundraising and, most important, in lost impact.”

 

However, the Guild's is basically a government contractor that provides services for the blind. Should CEOs of such firms be so highly paid?

 

As the Voice explains, “The point of contractors, we're always hearing (even though it's often shown to be untrue), is that they'll lower costs by introducing competition. So how are they successfully lowering costs for taxpayers when their CEOs are earning more than "government CEOs" like Mayor Bloomberg ($225,000, though Bloomberg only accepts $1 of that), Governor Cuomo ($170,000), and the president of the United States?”

 

To be fair to Morse, CEOs in another category of non-profit firms have even more outrageous salaries. The Huffington Post reports that many leaders of non-profit interest or lobbying groups are earning big-time, seven-figure paychecks. For example, Tom Donohue, the CEO of the US Chamber of Commerce, took home $4.7 million in 2010. American Petroleum Institute CEO Jack Gerard, did even better, earning $6.4 million in the same year.



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