CEO Compensation at Charities – What Influences Pay?

by Linda M. Lampkin, Senior Nonprofit Compensation Specialist 16. November 2012 08:40

A recently released report on compensation for CEOs of charities authored by Charity Navigator confirms what ERI Economic Research Institute has found in its research over the past decades – what a CEO gets paid depends on the location, the size, and the mission of the organization.

The IRS states that nonprofit CEOs should receive reasonable compensation. Charities are encouraged to collect data from comparable organizations and use that data to determine reasonable compensation for their executives. While the IRS does most of the compliance investigations, there is also scrutiny at the state and local government levels. When governments use taxpayer dollars to buy services to be provided by nonprofits, high pay for those nonprofit executives has become a hot-button issue. 

Charity Navigator’s report found that the median compensation for a charity CEO was $132,739 in 2010, based on salaries from 3,786 mid to large charities reported on IRS Forms 990. For CEOs holding the same job in 2009, the average increase in salary for the year was only 1.5%. These do not seem like alarmingly high numbers, but, as usual, the report revealed that CEO compensation varied with the type or mission of the charity, the location, and the size of the organization. Charity Navigator has even included a list of the highest paid by type of charity in the report.

ERI also recently completed an analysis of salaries for about 100,000 CEOs in charities. The findings of both studies reach similar conclusions. While most nonprofit leaders earn reasonable (or less than reasonable) salaries, a few earn much more than expected, based on salaries in comparable charities. 

Check out both reports for typical wages in charities of different sizes and types. Much more detail is available in ERI’s Nonprofit Comparables Assessor. This software allows the user to search for comparable organizations by choosing a specific revenue size, geographic location, and type of organization. Then, the comparables included in the analysis will truly be relevant. The basic demonstration version can be downloaded for free.

It is useful to know how CEO compensation levels relates to those in comparable organizations, whether you are donating to, contracting with, or working for a charity.  ERI’s Nonprofit Comparables Assessor provides the ability to select key variables (size, location, and type of organization) that strongly influence the calculation of reasonable pay so that an assessment of reasonableness can be determined.