Getting What We Deserve

Posted by Laura Otten, Ph.D., Director on March 26th, 2010 in Articles, Thoughts & Commentary

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We are our own worst enemies.  We perpetuate myths, we engage in worst practices instead of best and we straddle ourselves with behavior and attitudes that can do nothing but harm us.  It is time for the nonprofit sector to take control of itself and prove to the rest of the world that we deserve the respect that we so crave.

First, let’s bust the myth that our employees do NOT deserve livable, competitive salaries.  They absolutely do, and you know it.  While many nonprofits have begun to address this, adjusting salaries and bringing them in line with what the real market will bear, others still cling to the notion that nonprofit employees get their reward in the mission work and aren’t there for a decent salary that ensures a reasonable quality of life.   And as long as there are any nonprofits living that myth, the rest of the world will continue to cling to it.

To wit the current hue and cry over the 2008 compensation of the CEO of Boys and Girls Club of America.  According to the Boys & Girls Club of America’s 2008 Form 990, the CEO made $988,591 in total compensation in 2008– $593,926 salary, the rest “other compensation.”  She also had 8 colleagues who also earned over $100,000, for a total of $1,862,519 in salary and a bit more than $300,000 in additional compensation.  So, in total, this organization spent $3,151,937 on its nine highest compensated employees.  The organization also reported total revenue for 2008 as $107,150,617.  Which means that in 2008, the Boys & Girls Club of America spent 3% of its revenue on what should be presumed to be its nine most senior managers.   These nine employees report working an average of 58 hours/week, with a range of 45-70.

Too much?  When I googled the question as to what the for-profit ratio of salaries to revenue should be (as this is not an area I claim to know anything about), I got back all sorts of figures, with a low of 16% to a high of 50%, and much here seems to depend upon the industry.  No where, however, did I see a figure as low as 3%.

Yes, it is true, that Boys & Girls Club gets almost $41 million in government grants.  And yes, it is true that, as with many for-profits and nonprofits, the Boys & Girls Club experienced an almost $14 M dollar loss in 2008, approximately 13% of what it did bring in.

But still.  Compare this with the salary of the AIG CEO installed in the aftermath of the meltdown of America’s financial industry.  In October 2009, Obama’s “pay czar” approved the salary of $10.5 M, which included $3 M in cash, $4 M in stock options and $3.5 M in annual performance bonuses, to be prorated for 2009.  At the time, the pay czar said this package was comparable to other CEOs in the post-meltdown world.  Too much?  Too little?

How do you decide in a vacuum?  Shouldn’t the salary and possible bonuses be determined based on the scope of the work being required to perform and the quality of the performance of that work and not the whether the organization is profit driven or mission driven?  That mission-driven organization is just as dependent upon its leader running and managing a successful business as the profit-driven organization; its leader needs the same savvy, skills, smarts, and leadership essence that a for-profit organization needs, if not more.  For, after all, as we are regularly reminded (as if those in the nonprofit sector need any reminding at all) that we are using other people’s money—from taxpayers to foundations and corporations to individuals—to fulfill the promises we make in our mission.  It could easily be argued that it takes more skill and savvy to raise money and ensure that those promises are kept, and Peter Brinckerhoff states that nonprofit employees work much harder than for-profit employees.  So, who is to say that nonprofit CEOs deserve a lower standard of compensation?

The opinions expressed in Nonprofit University Blog are those of writer and do not necessarily reflect the opinion of La Salle University or any other institution or individual.

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