According to The Chronicle of Philanthropy’s annual compensation survey, the 2012 median salary increase for CEOs at the biggest US charities and foundations was 3.1%, compared to 3.8% in 2011. What has changed is the increasing number of performance-based bonuses and incentives, now reported by one-third of the 313 organizations included in the analysis. The data set included 118 organizations that reported 2012 data and 195 that reported 2011 data. There is typically about a two-year lag in availability of data from the Form 990 because of the timing of filing deadlines and extensions, as well as the necessity of form processing.
Some highlights from the survey included:
- The median compensation in 2012 for all CEOs was close to $418,000. Foundations paid more, with a median of nearly $498,000.
- Of the 313 large nonprofits, 34 paid their CEOs more than $1 million, compared to 23 in last year’s study.
- Twenty-two groups in 2012 reported that someone other than the CEO—a chief investment officer, a football coach, or a surgeon—made more money than the chief executive.
- Of the top 20 highest-paid executives in the large organizations studied, only 2 were women in 2012.
So many more of these large organizations now pay their CEOs more than $1 million – is that an unreasonable salary? The medians presented in these survey results must be further refined to answer that question, using data from only comparable organizations. The IRS says that the comparables should be for executives with similar responsibilities in similar organizations. Sometimes that may even include data from for-profit companies, if the skills needed by the executive could also be found in such companies. These questions should be asked to determine relevancy for determining comparable organizations: where can the executive with the appropriate background be found and what organizations would compete for that talent (regardless of the sector)?
Setting the “right” nonprofit compensation requires data from relevant comparables, which can be easily assessed in ERI’s Nonprofit Comparables Assessor. This software uses a database of all the Form 990 compensation data and allows the user to select the relevant characteristics (size of organization, industry or subsector, geographic location) and provides an estimate of what is reasonable compensation using a statistical model. This is the same tool used by the IRS to identify compensation outliers. Download a free demonstration version of the Nonprofit Comparables Assessor to see if the CEOs in this report have salaries in line with the market for their skills – or whether they should be expecting some questions from the IRS.