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Nonprofit Executive Compensation, Setting Nonprofit Salaries

When it comes to nonprofit executive compensation, nonprofit organizations have 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 nonprofit corporation will have a surplus of 1.5 to 3 million dollars to candy out to its executives and other expenditures.

The IRS Reasonable Compensation Definition for non-profit Organizations

As in the for-profit sector and specially the financial sector, the nonprofit tax laws have been hacked to pieces to ensure that top charity CEOs can enjoy their private jets and multi-million dollars homes in the Caribbean. The IRS has a laughable term describing fair organizations executive compensation which gives the green light to this shameful money sacking: “Reasonable Compensation.” The IRS 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 pay standard, the 2.5 million dollar CEO salary of William Barram of the American Cancer Society, or the 1 Million dollar CEO salary of Gail McGovern of the American Red Cross is rightly justified, because the net income of their respective tax exempt nonprofits is comparable with the for-profit enterprises of their class.

And when charity watchdog groups disclose these pay 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 nonprofit thieves are entitled to public donations that were intended for a charitable purpose rather 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 nonprofit organization” board is paying it’s CEO 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.

Compensation of the Nonprofit Criminal Executives

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 junks 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.

Nonprofit CEO Salaries

Tax exempt nonprofit organizations or a charity is no different from a for-profit entity. 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 spent, but in nonprofits, the faith of the donors are in hands of it’s board, a few volunteers, and more often than not, the organization’s CEO holds a dictatorial power over the governing body and the board of directors.

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.” What the hell ever that means.

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 tax exempt nonprofit organization goes under, there is no one to take the hit, not even it’s board. 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 of this criminal racket 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 executives who stole their money in the name of making a difference.

We are being told on an alarmingly increasing rate, that being a charity and nonprofit doesn’t mean not making a profit. More and more tax exempt nonprofits and charities are running mafia-style businesses as they hire and compensate their own relatives as CEO, CFO,.. 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 excessive executive salaries, nonprofits did just that and the poor received the majority. Imagine that.

Nonprofit Relatives CEO Salaries

Why is excessive nonprofit executive compensation an issue?

It’s not the legality of these gruesome tax exempt executive compensations that is the issue; it’s the morality and deception 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 pay and 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 tax exempt charity really more “complex” than running a 300 million plus population country? If not, how do you justify executive compensation and 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 to China too, they sure as hell will do a better job of it for a much lower pay.


There are 31 comments (Click to Read)

Avatar for Patty Quackenbush
Patty QuackenbushJuly 2nd, 2021 at 8:39 pm

There should be a “cleansing” of charities and these outrageous salaries. I really think Congress should have term limits and a lot less salary. Remember, Congress voted themselves a pay increase every year Obama was in office, but Trump vetoed that after Congress complained that their lowest paid member only received $170,000 per year plus “Cadillac” health insurance which taxpayers paid for, plus all kinds of perks and expenses and most after 5 years of service, if they ever elect to retire lol, they get to leave with everything they were getting. Americans need to wake up and “clean house”.

Avatar for Jay
JayFebruary 14th, 2021 at 10:49 am

I’m so disgusted with greed in a nonprofit. I am constantly battling a addiction to drugs. This disease has taken me to many places for help. In one “nonprofit” rehab we were asked to pay $750 entry plus $200 a week. It is understandable that place can’t operate without resources, but when you put a fragile newly sober person in a house and put them to immediately in a full time job, a lot of pressure arises. When you pack 13 people in a house and you are bringing in 12k a month why are you always asking for donations? Why did you just move into a bigger house? Why are so convinced that others will always overlook your motives just because you put for a good cause. The bottom line is yes they deserve a salary, but at what cost is lost to overspending for personal gain over the concern for a newly sober person who prob. Need a little time to adjust to the new life. What is true intentions.

Avatar for Marty Miller
Marty MillerOctober 15th, 2020 at 2:20 pm

I appreciate this article, thank you very much for doing this work. Only, the unrefined cursing in it prevents me from being able to share this as a follower of God’s Christ, as we are forbidden from cursing and using foul language (Colossians 3:8).

God says, “the love of money is a root of all kinds of evil.” Thats what we are seeing here, selfish people who do not truly love the people they are serving. For, “the greatest sign of love is sacrifice.”
May God forgive these actors who demand such high salaries and show them that they are deceived, walking in an errounous and foul way.
One of the talking points we need to present when debating this topic is that it really depends what you are doing an NPO when you set a salary. If you are working for poor and sick people, it is all the more selfish, arrogant and destructive to pretned like you deserve to make so much more than the average American while you serve the poor, or else you will not serve the poor. Do you really love the poor if you talk that way?
So “feeding America” puts out a memo saying, “54 million people will face hunger in America this year…donate now…” Then they pay their CEO 550k a year, 10 times more than the average American. How many people would face hunger if you were humble and loved those people like they were your own children and family members? What if you took 35k a year, then how many starving people would there be? I wonder how many meals you could buy with 515 thousand dollars?
How do you explain to a poor woman that she and her kids are only worth 5 cans of corn but you are worth half a million dollars because you were lucky enough to have a college education and so you got a job collecting money for her?

There is a God in heaven who judges all people, and He says that He is perfect, doing good in every thing He does. The Lord Jesus Christ died for these people’s sins so that they could stop doing wicked deeds like this and live forever, so I pray that He will bless them to stop this and I pray for all people to see that greed is destructive, and that that we must, “love our neighbor as we love ourselves.”

Avatar for Martha Wallace
Martha WallaceMay 11th, 2020 at 5:29 pm

I love you! You shoot straight, no chaser! I agree wholeheartedly that there is too much greed and not nearly enough empathy and heart for people who need services in the charity sector…Bless you for being honest and firm.

Martha Wallace

THOMAS ALBANOJune 3rd, 2018 at 1:24 pm

I’m a 75 year old guy, a USAF veteran. I wanted to start a non-profit that would help disabled vets from all branches. I would feel guilty about taking any $$$ to cover my fuel cost and any minimal expenses. I’ll just continue to thank those guys when I see them.

Maybe we can start an organization that can/will expose these “way” over paid
CEO leeches.

Avatar for Sad
SadMay 26th, 2018 at 2:41 pm

I work for a nonprofit currently. When I started there were 34 employees all who were to help those in need. Since our new CEO & CFO started 3 years ago we have turned into a money making machine. We are up to over 200 employees. The CFO is very busy getting million dollar loans for the organization with no regard to cash flow & we have zero reserves. These loans have been a $2.3M jet, $5M headquarters building & a leased Tesla for the CEO. With the growth we need a new headquarters but a $5M luxury building?? We are mostly funded by government grants, fund raising is a tiny part. And a big question I have is who is watching the store? The government isn’t, our board members certainly aren’t. We do still help our clients but there is a lot more that could be done. I am so upset, this is not what I signed up for, keeping my options open at this point

Avatar for Geri Battleday
Geri BattledayMarch 19th, 2018 at 8:31 pm

Why don’t all of you starting a non profit look for volunteers!!! A lot of communities have high schoolers in programs that require a certain amount of volunteering locally. All kinds of people willing to help for free, knowing they are making a difference is enough!!! Just saying

Avatar for Aggie
AggieJanuary 11th, 2018 at 3:59 pm

it dropped my jaw to the floor…and boiled my blood…its just not right…and you are absolutely right…salary should be based on how much non profit can pay with out abusing budget needed to help others…i love this article

Avatar for Juli Koffman
Juli KoffmanJune 5th, 2017 at 7:54 pm

Thank you for your frank examination of the nonprofit world. The topic of compensation is a little nerve wracking, to be honest. I am definitely not in this for the money, but my goodness I would love to be able to leave my corporate job and focus 100% of my time and attention on doing what I care about the most. Unfortunately, that’s not an option at this point, but I am looking forward to that day. Thank you for your site, it’s truly beyond valuable.

Avatar for J. Carter
J. CarterDecember 23rd, 2015 at 9:04 pm

Over the past two days I have read several articles regarding the excessive salaries and bonuses paid to CEOs and other top executives of non-profit organizations and school board superintendents. I found one common statement in many of the articles. Many of the articles claim that top dollar must be paid to the executives in order to get a person with a mind to do the work they do to keep the organization running. Well if that is true shouldn’t the same philosophy hold true for the people on the front line that are doing the work? Social service jobs such as teachers and social workers are grossly underpaid but they do the job because they have a passion to help others, after all isn’t that the goal. If that is the case shouldn’t the people that do these jobs be the best at it. With that being said shouldn’t the salaries of these jobs be set high enough to attract the best people for the job? If any of you reading this post happen to be one of those executives or school board superintendents think about the front line people who are actually doing the work the next time you think about increasing your bank account with a fat raise. Yes it takes money to run a nonprofit organization, but it takes people on the front line with a passion to help others to make it successful.

Avatar for Denise D
Denise DSeptember 29th, 2015 at 12:07 am

Thanks for sharing your knowledge about nonprofit organizations as I begin my startup. I struggle with salaries including my own, and what is fair and reasonable for every startup. I want to make sure the programs are ran smoothly, therefore, there will be plenty of volunteers and interns assisting a very small small staff.

Avatar for David B
David BMarch 4th, 2015 at 6:41 pm

Very good read. Thank you for the insight. So as a NPO starting off, how much is a reasonable CEO salary, if the NPO will become the main source of income for the household of the person, whom will be running it full time? Thank you

Avatar for Robert Platt Bell
Robert Platt BellDecember 18th, 2014 at 8:28 pm

The problem is, you as the donor, have no way of knowing how much of your money is spent on “overhead” and how much on actual programs (many charities now call mailings asking for money as “educational programs” by tossing a brochure in with the mailing – making their overhead/program ratio look better).

Charitywatch is one good source.

But most people don’t have time to vet charities.

Be skeptical. Sorry, but I don’t think anyone “working for charity” deserves a million bucks a year salary.

Avatar for Robert Platt Bell
Robert Platt BellDecember 18th, 2014 at 8:20 pm

I agree with you and I don’t buy this “we need to pay the leader a million bucks, because the organization is so complex and hard to manage! nonsense.

There are people out there who are independently wealthy, perhaps retired from running Fortune 500 companies, who would like to keep their hand in, and do something for charity. Why not ask them to run one of these charities?

I remember Elizabeth Dole was head of Red Cross for a while – she made $600,000 and donated most of it back to the Red Cross. She didn’t need the money.

Failing that, why not hire someone for less money and see how that works out?

It is the “big tent” theory – if the CEO makes a million, then the assistant makes $900,000, and his assistant $800,000 and so on. High salaries are like the tide – they raise the salaries for all the people in the charity – and pretty soon, people are worried more about their own perks than what the charity was set out to do.

IF PEOPLE STOPPED CONTRIBUTING, then maybe these “Charities” would re-think their priorities. I was living in Alexandria, VA during the United Way scandal (remember that? Spending your charity dollars on limos, hookers, and trips on the Concorde).

While that was fraudulent abuse of a charity, the “legitimate” expenses can be staggering – and seem rather excessive.

What I find interesting here is that the people disagreeing with you are not responding to your arguments, but ATTACKING YOU PERSONALLY – a sure sign you are on to something. The first commenter accuses you of being “angry” when in fact, you are raising valid points that need to be addressed – and abuses in the charity business than need to be curtailed.

CEO salaries in the USA are staggering – compared to salaries in Europe and Asia for similar sized companies. When Mercedes bought Chrysler, the executives at Mercedes (a profitable company) were chagrined to find out their counterparts at Chrysler (a money losing company) were often making twice as much as they were! Things are just not done that way in Europe – and yet they prosper.

So using the analogy of CEO salaries is also a bogus comparison. CEOs in the USA are overpaid by world standards. Heads of charities are obscenely overpaid in the USA.

Keep up the good work!

Avatar for Marisel Matos
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.

Avatar for Lisa
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!

Avatar for Anita
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!

Avatar for Valerie
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.

Avatar for Tammy
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. 🙂

Avatar for CL Jones
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.

Avatar for John
JohnMay 9th, 2013 at 3:12 pm

I was just fired from a non-profit for standing up for the unethical practices they indulged in. Employee’s did not receive any raise for years but were added with more responsibility. 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.

Avatar for Puna
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 certain systems for their gain. I am very grateful 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 !

Avatar for Marion Johnston-Boyce
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.

Avatar for Robyn Blackburn
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.

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

Preach my dear Sir… well said!

Avatar for veronica
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.

Avatar for Admin
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.

Avatar for Karen
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!

Avatar for Clifford
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.

Avatar for Admin
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.

Avatar for Katerina
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.

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