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Nonprofit executive compensations, road to greed and deception


The nonprofit sector has become every bit as greedy as the for-profit sector, and in some cases, it has surpassed the latter. In today’s market, the administrative cost and nonprofit executive compensations has become a direct derivative of the organization’s net income. The more the organization receives, the higher the salary of its executives will be. A 10 million dollar corporation will have a surplus of 1.5 to 3 million dollars to candy out to its executives and other expenditures.

As in the for-profit sector and specially the financial sector, the nonprofit laws had been wacked to pieces to insure that top players can enjoy their private jets and multi-million dollars homes in the Caribbean. The IRS has a laughable term describing the circumstance which gives the green light to this shameful money sacking: “Reasonable Compensation.” Reasonable compensation is defined as “the value that would ordinarily be paid for like services by like enterprises [for-profit] under like circumstances.”

Going by this vague standard, the 2.5 million dollar salary of William Barram of the American Cancer Society, or the 1 Million dollar salary of Gail McGovern of the American Red Cross is rightly justified, because the net income of their respective organizations is comparable with the for-profit enterprises of their class. And when watchdog groups disclose these numbers with public and a few souls raise their concerns, the kind of Miss Betsy Brill, publish defensive articles in nation’s economic papers like Forbes to tone down the criticisms. In her article for Forbes Magazine, titled Nonprofit CEOs Are Worth Every Dime”, Miss Brill goes on and on to why these thieves are entitled to public donations that were intended for a different purpose than buying another Rolls-Royce:

“…critics may cause donors to question–or even to pull back–their charitable giving at a time when nonprofits are struggling to meet an increased demand for services in the face of government cutbacks and dwindling private support.”

What did she just say? “At a time when nonprofits are struggling?” Miss Brill never explains why the “struggling organization” is paying a man a seven figure salary if it is indeed struggling. But she is quick to add: “Keep in mind that the highest paid CEOs are overseeing complex multimillion-dollar ventures.” Does she have alternative motives? You bet.

For many years prior to the market collapse of 2008, over-fed, over-paid, white-color financial analysts told us the very same thing, “AIG is doing wonderful, Lehman Brothers is at the top of its game. Don’t fear, invest, buy this, give them your money…” And when the economy collapsed and 700 billion dollars came out of the taxpayers’ pockets to bail out these criminals, these very same analysts justified their deceptiveness by saying that what they said was “just an opinion”. They got paid to put AAA ratings on worthless Collateralized Debt Obligations (CDO) and investors bought these high risk worthless pieces of shits because credit rating agency’s like Moody’s and Fitch endorsed them and backed out later. Miss Brill doesn’t work for a Credit Rating Agency, she owns a counterpart of it in the nonprofit sector. She is the President of Strategic Philanthropy, Ltd., a philanthropic advisory firm in Chicago. Same shit, different name.

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The nonprofit entities are not that different from for-profits either. Where there is money, there will be always greed. Where there is money, there will be also power, and mankind is prone to abuse both. In for-profit corporations, the share holders and investors question the executives on how their money is being played, but in nonprofit world, the faith of the donors are in hands of a few volunteers and more often than not, the organization’s CEO holds a dictatorial power over the governing body. It is irrelevant that the board has the power to hire and fire the CEO, the CEO in a nonprofit organization is nevertheless the dictator and the law maker of the organization with only the IRS to answer to. And the IRS position is already clear: “reasonable compensation.”

The only difference is that when a for-profit corporation goes bankrupt, shareholders and investors lose money and their outcry makes the evening news, but when a nonprofit organization goes under, there is no one to take the hit. Donors give less than a shit – hey, they gave the money away in the first place – and in most cases they don’t even want to know where their money goes as long as the organization has a picture of a skinny black baby or a woman with one breast cutoff on the header of their website. The real victims are the poor, the class that was supposed to be served, but they have no voice. Their voice, if any, gets lost in the roar of the private jet engines and sport cars of the thieves who stole their money in the name of making a difference.

We are being told on an alarmingly increasing rate, that being nonprofit doesn’t mean not making a profit. More and more nonprofits are running mafia-style businesses as they hire and compensate their own relatives inside the organization with many six figure incomes. Then the seven figure elite supporters come in and tell us that only those making these ungodly sums have the intellect and capability to pull off the operations in these large entities. But, long ago, before there were these salaries, people did just that and the poor received the majority. Imagine that.

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It’s not the legality of these gruesome compensations that is the issue; it’s the morality of the whole business. I founded a nonprofit organization because I was compelled to help people and I surrounded myself with those who had the same inkling. Do I have the power to abuse them? Absolutely. But at the end of the day I know, what I take is what could have put a smile on a child’s face. To me that’s the drive not the salary. Maybe I’m radical but I do see the struggle of the poor first-handed on daily basis.

I leave you with one question: is the job of managing a charity really more “complex” than running a 300 million population country? If not, how do you justify salaries as large as six times of the US President? Don’t we have any talented people willing to manage charities in the same unselfish spirit as their donors? If not, we should outsource these jobs too China too, they sure as hell will do a better job of it for a much lower wage.

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There are 18 Feedbacks

KaterinaJune 5th, 2012 at 9:08 am

You’re very angy and I don’t think you understand corporate governance very well. Have you heard of the Walt Disney string of cases which occurred in the 1990s? Though Disney was a private profit-seeking corporation, the same principle applies to those cases as applies to executive compensation policies. You can be as frustrated as you’d like, but the fact of the matter is – to get a brilliant mind in the hot seat of a non-for-profit when they could very well be sitting at the head of a WalMart, or Key Bank, or ExxonMobile costs money. If the Red Cross is unwilling to compensate at X level, someone else will. Also, I don’t know how you run your not-for-profit, but executives generally receive bonuses for the unspoken purpose of charitable donation, campaign endorsement, or marketing/business expenditures. Very rarely does that sum land in their pockets.

AdminJune 5th, 2012 at 2:16 pm

@Katerina I (unfortunately) understand the corporate governance VERY WELL. You argument is the exact principle I oppose, and this is the exact problem of our society. You either have an American Dream or you have a hope of making your million the exact same way. The difference between you and I is that I don’t give a rat’s ass about money, nor do I put the welfare of others ahead of ANY worldly possession. If you think that a million dollar salary is justified by any means, this blog post was directed specifically at you. No brilliant mind is worth a sum capable of feeding a million hungry kids. And no, I don’t consider any fat overpaid, over indulged, over credited blood sucking cocksucker who sits at top of the fortune 500 corporations to be any fucking more brilliant than people who do it with love and for the sake of doing it. Albert Einstein had a “brilliant mind” and his compensations never even broke the fraction of what goes on today, even adding the inflation.

CliffordJune 5th, 2012 at 2:32 pm

Amen brother. Good to see someone say it the way it is. Thanks for making this site available, I have used this site for the past 3 months working on our form 1023 and I find your approach down to earth and bullshit free. Thanks for sharing.

KarenJuly 18th, 2012 at 8:53 am

I too agree… I have worked to help our communities here in Hampton Roads Virginia for several years. I am just now starting my own non profit, because too many people seem to put the money in the CEO’s pocket and not into the programs in which they are intended. It is so sad that so many are getting “Rich” from working for a non-profit, when the funds donated are intended to help those the organization claims to want to help as well, but only help themselves to the money.
Great job and thank you!

AdminJuly 20th, 2012 at 10:57 am

Hi Karen,

Thanks for doing it for the love of it. I wish more would think like you.

veronicaSeptember 18th, 2012 at 6:41 pm

Thank you for posting this site. I feel the exact same way. I lost a job because I ran the execs in and they lost the funding. I couldnt stand to see money that was given to the poor be misused. Sometimes brilliant minds arent put in charge of money. Sometimes it the straight up ignorant folks. I hold a masters in social work have worked in a couple of organization where the money could have worked differently and helped more families. However, when you offer this insight the higher ups are worried more about their salaries and losing the funding rather than helping families. I am a recipient of social services and I wished more people ran more honest nonprofits. St. Louise House in Austin Texas is a great example of a well run nonprofit organization. The Director is paid modestly and she does the work because she loves the work.

Juan Carlos ZayasOctober 21st, 2012 at 6:52 pm

Preach my dear Sir… well said!

Robyn BlackburnDecember 30th, 2012 at 9:00 pm

I have enjoyed using this site, reading through the pages over and over again to grasp the understanding of what is involved.. I love the frank and honest approach and will leave a donation as I exit.

Marion Johnston-BoyceJanuary 2nd, 2013 at 8:23 pm

Thank you so much for assisting us (those who are starting a nonprofit) with as much detail as possible to complete the 1023. Since I am the CEO, I would like to find out if I can put myself on payroll. I’m sure I can, however, after reading that directors cannot be on payroll, I am a little unsure, as I will also be one of the directors sitting on the board.

PunaJanuary 17th, 2013 at 5:57 pm

Mahalo For having this site, and for saying it like it is. To many times to many people take advantage of certian sytems for their gain. I am very greatful that you have taken the time to share your mana’o (knowledge) in order to assist others. I currently work for a non-profit and see so many fill their pockets instead of using the funds to benefit all those who are in need. I am finally moving forward with my very own non profit so I am able to help our children and kupuna ( elders) in areas that is very much needed. We need federal reserved notes in order to pay for things in this life but its not what is important. People are important . So again Mahalo nui loa for sharing. E Iesu Pu !

JohnMay 9th, 2013 at 3:12 pm

I was just fired from a non-profit for standing up for the unethical pracitices they induldged in. Employee’s did not receive any raise for years but were added with more responsiblity. The CEO in that time would flood funds into Marketing and Social Enterprise ventures. When the CEO thought it was a good idea to purchase and install a $7000 door people were pissed and morale crashed. Cutting programs and laying people off while she fed her ego and power hunger nature was just sick. I am glad am out of there.

CL JonesSeptember 30th, 2013 at 5:21 pm

Charity is grossly abused by highly compensated directors, etc. Many will extract thousands of hours from volunteers without compensation and go to sleep at night knowing they took hard earned dollars from honest donors for personal gain.

No honest “NPO” should ever use greater than 10% to maximum of 20%; of contributions and earnings, for operations and administrative cost including salaries. This would allow maximum use of true charitable services intended by its donors.

[…] because, ahem… Private Corrections Profit off Human Suffering, I would like to point out that many CEOs of nonprofits have corporate jets. And if you think the government is better than the private sector at running things, you obviously […]

TammyApril 2nd, 2014 at 9:21 pm

So is $80,000 a reasonable salary? According to BLS, it is the normal range for directors of a non-profit. Just asking. :-)

ValerieApril 23rd, 2014 at 11:50 am

IMHO, $80,000 is reasonable IF the nonprofit is solvent and not struggling. I once left an organization that was struggling but was surprised that the exec. was making $73K An organization that was probably similar budget-wise was paying their exec. $55k. There’s a big disparity. People will do everything to justify their million-dollar salary. I would want an exec who is passionate about the mission and willing to take a more reasonable salary–not expecting to own private jets, yachts and all the toys.

I just think we are in an age of overall greed, corruption, and bad behavior that gets justified.

AnitaMay 30th, 2014 at 8:22 pm

Eye-opening data. Makes one think twice about donating. Seems like every $1 that is donated to the cause only 1/10 is actually utilized for the purpose. Very sad indeed!

LisaSeptember 1st, 2014 at 4:19 am

This has been a struggle for me deciding whether I want to go through with my non-profit organization. My heart’s desire is to totally pay it forward by doing as much as I can to assist others in improving their lives. I am work full-time and earn $80,000 a year which is I found myself donating to people in need anyways (this includes supporting a family of six as my husband undesirably works part-time).I don’t want to take advantage of the system or people who really need assistance in various arenas in their lives. Thereby, reading these comments I have decided to move forward, THANKS!

Marisel MatosSeptember 25th, 2014 at 11:53 am

I too am starting a non profit and I am doing it to make a difference. Reading this makes me feel that I am not going to be paying my members/ managers enough. We all know that we are doing this for the passion of changing the youth and working with the at risk children. When we get to a state that we can draw better salaries then we will talk about it then.
Thank you for this site. I appreciate it.

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