What Drives Executive Pay in the Not for Profit Sector?

Flickr Image:  Some rights reserved by inlinguaManchester

Pay scales for executives in the Not for Profit Sector don’t usually make for dinner party conversation – but there are some current trends that could change this, making annual remuneration less than palatable for some in the sector.

Figures produced by online job sites show that executive pay scales dipped in recent years and have only shown signs of improvement in the second half of 2011.

But Damien Smith from governance specialists, Enterprise Care, believes NFP Boards will increasingly be more open to ensuring that the right candidates are selected or that existing quality executives are retained.

“This will inevitably translate into seeking more candidates with a ‘hard-edged’ commercial view of the world and in turn will lead to the increasing remuneration across the NFP sector’s classifications,” he predicts.

Enterprise Care’s figures saw a dip in executive remuneration in 2009 which it says was clearly linked with the Global Financial Crisis.

The average wages for an executive director of a medium size Not for Profit organisation in Australia is around $65,000 give or take a bonus or two, according to online job search company, MyCareer.

And Enterprise Care (EC) suggests that the averages, generally, are increasing each year.

But the dollar figure can vary dramatically when taking into account a person’s years of experience, the location, the size of the organisation and the enduring issue of gender.
As well there are a myriad of classifications (up to 17) ranging from within the $100,000 range to well over the $500,00 range.

According to MyCareer more than 42% of NFP Executives have between 10 and 19 years experience in the Sector and another 39% have more than 20 years experience. The pay scale for such extensive experience can be from as low as $70,000 or up to $187,000.

The figures show that executives in Victoria earn more than their counterparts in NSW perhaps confirming that Melbourne is the capital of philanthropy in Australia and there’s stiff competition for good bosses.

In Melbourne, the pay scale is between $75,000 right up to $198,000 while in Sydney the scale is down to $36,000 and peaking around $172,000.

Some of the compounding issues are around the size of organisation and what the Not for Profit actually does.

Overall, woman with more than ten years experience can expect to earn between $70,000 and $118,000 as a Not for Profit executive. However her male counterpart with the same experience can be earning between $85,000 to $162,000.

EC has found women earn around 80-85% on average of their male counterparts.

EC’s Damien Smith says like many issues there are certainly a number of critical drivers of NFP executive pay rises.

“Anecdotally, some CEOs and senior managers took pay cuts to keep their organisations afloat during the Global Financial Crisis. Falling bonuses, some reductions in benefits and declining professional development funding were major factors in these dwindling incomes” he says.

But since then there has been a bounce. Significantly, he says, there is now a growing awareness and better understanding of the size and magnitude of an executive’s role in a Not for Profit.

“The world did not stop for NFPs. Despite the continuing pressures and uncertainties that many NFPs operate under most have survived and are placed to pursue opportunities and even growth. This is a credit to the many hard working and dedicated executives. Boards and constituents can readily acknowledge this situation.”

Enterprise Care produces an annual Not for Profit Remuneration Report which provides detailed remuneration data for senior positions as well as tracks trends in remuneration levels over the last decade. 

Smith says as the economy improves the pay structures of the commercial and government sectors is also an influence in NFP executive pay.

“This becomes more so as there is far greater transfers in and out and across all of these three sectors today,” he says.

While the efforts of executives in many NFPs during this past challenging period has been excellent, he says the increasing expectations on executives to perform as well, as the higher levels of accountability have lead to ongoing adjustments in remuneration compensation.

“Combine this with the ever increasing complexity of organisations- be it from regulatory, funding arrangements, competition, stakeholders or structures- which has meant that executives need to be more intensively involved in meeting the needs of their organisation”.

As well he believes that higher executive payments are more acceptable now than in the recent past – both to the stakeholders as well as the individuals too.