US Charity CEO Pay On the Rise

In the US a typical charity Chief Executive Officer has received a 2.5 per cent pay raise in the last year and on average earns $A132,000 in take-home pay, according to charity evaluator, Charity Navigator.

The study examined CEO compensation at 3,929 mid to large-sized charities in America to help donors, policymakers, charity Boards and others understand how leadership pay varies by the charity’s location, size and mission.  

Charity Navigator says research found that some charities still report that they essentially set their CEO’s pay in a vacuum of information.

Some of the findings from the report include:

• Modest raises are the norm since the recession: Salaries for the CEOs in this study increased modestly since the recession: just 0.8 per cent from 2008 to 2009 and 1.5 per cent from 2009 to 2010 and 2.5 per cent from 2010 to 2011.  These fairly small increases come after the 4.7 per cent median increase charity CEOs received from 2007 to 2008.

• Charity CEOs that aspire to have big salaries are more likely to succeed if they work at an Education-based charity: The data shows that top pay at charities can vary greatly by mission with the heads of Educational charities earning as much as $90,000 more than those running Religious charities.

• Geography influences the top executive's salary: CEO salaries at Not for Profits  reflect the regional variation in the cost of living.  For example, CEOs at charities in the Northeast ($149,523) and Mid-Atlantic ($147,474), which include Boston, Washington D.C. and New York, tend to earn higher salaries, than those in the Mountain West ($108,893) and Midwest ($114,050), which include Milwaukee, Boise and Salt Lake City.

• The bigger the charity’s budget, the bigger the CEO’s wallet: Not surprisingly, the higher the charity’s total expenses, the more likely it is that the CEO will earn higher compensation.  Charities with more than $500 million in total expenses report a median pay of $422,578 for their CEOs whereas charities with $1-$3.5 million in total expenses report a median pay of just $95,661.

• While most  Not for Profit leaders earn reasonable salaries, a handful earns excessive wages: 11 of the charities in the study pay their CEO more than $1 million.  That’s up from the calendar year 2010 when six charities in the study had CEOs that were paid at least $1 million.

• There are still some charities that report they essentially set their CEO’s pay in a vacuum of information:  Not for Profit Boards should have a documented policy for establishing the CEO’s pay.  That objective process should include a review of the CEO performance and benchmarking against comparable organizations.  244 charities in this study reported that they don’t have a policy in place for determining their CEO’s pay.  The good news is that this is down from last year when 543 charities reported that they didn't have a policy for setting their CEO's salary.

“Given our research, which show that the typical charity CEO earns just $US125,000, we do not believe that salaries approaching a million dollars or more are needed to attract bright, able, and committed candidates to positions of nonprofit leadership,” President and CEO of Charity Navigator Ken Berger said.

“As such, we agree that donors should continue to be skeptical of charities that pay salaries hovering near or above one million dollars, but that they not discount organizations where the leader's pay is in the low six figures.”

CEO pay includes salary, cash bonuses and expense accounts, but not contributions to benefit plans or deferred compensation that is allocated to be paid in later years.  

Charity Navigator evaluates the Financial Health, Accountability and Transparency of nearly 7,000 charities.

Access the complete study, including tips to help donors evaluate CEO pay, here.