Charity Navigator’s 8th Annual Compensation Survey of nearly 4,000 medium to large-sized charities concluded that the median CEO salary was close to $126,000, and the median increase from 2010 to 2011 was 2.5%.  The report can be downloaded for free here.

The report also breaks down compensation by size, geographic location, and type of organization, but most compensation committees of nonprofits will have to look further for the detailed information needed to set appropriate salaries for their executives.  As usual, the devil is in the details.

Charity Navigator has created a database of Form 990 information on charities receiving a majority of their revenues from the public, a total of about 7,000 organizations (ERI’s database includes information on over 100,000 charities that report compensation each year.).  About 3,000 were dropped from the analysis for various reasons (discussed in the appendix to the report).  So the first issue is which organizations are included.

The second issue is size.  In this study, size is defined by total expenses into small (charities with total expenses between $1 million and $3.5 million), medium (expenses between $3.5 million and $13.5 million), and large (expenses greater than $13.5 million).  About 80% of all US nonprofits have expenses of less than $1 million, so this information will not apply to them.  And it seems that pay for a CEO leading a $15 million organization would be different from that in a $1 billion organization, but both are grouped together as “large.”

Next to be considered is geographic location, as organizations are grouped into regions. While higher CEO pay is reported in the Northeast ($149,523) and Mid-Atlantic ($147,474), the Northeast region includes both New York and Vermont, while Mid-Atlantic includes both West Virginia and Washington, DC, locations with very different pay structures.

And finally, organizations are grouped by mission, but only in broad groups.  If a list of similar organizations is to be constructed, it is necessary to choose from all organizations paying compensation, and then select the comparables by specific size, by geographic location, and by detailed mission.

After years of research, ERI created its Nonprofit Comparables Assessor to allow the use of all the above-mentioned criteria so that all relevant organizations are selected for analysis.  Any revenue level can be selected along with a specific state (or the US national average, if the labor market for an executive would be national in scope) along with a National Taxonomy of Exempt Entities code that reflects the organization’s mission.  This approach meets the IRS requirements for relevancy in setting reasonable compensation.  Unlike surveys that provide tables of salary averages or medians using one criterion at a time or surveys that group sizes and geography too broadly, ERI’s Nonprofit Comparables Assessor allows the detailed selection of multiple criteria that influence compensation. Download the free demonstration version and check it out.