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Show me the money: Shedding light on nonprofit salaries
By Andy Levy-Ajzenkopf
July 9, 2007
The topic of executive compensation in the voluntary community is a tricky one. While the sector continues to grapple with an identity crisis about whether it should adopt more “corporate” behaviours in the operation of nonprofits and charities, and the subsequent rewarding/evaluating of executive level officers, the fact remains that salary levels continue to be well below their for-profit counterparts.
A 2003 Environics “Survey of Managers of Volunteer Resources” conducted for the Canadian Centre for Philanthropy (now Imagine Canada), revealed some interesting findings relating to the thorny issue of salary in surveying 1,203 managers in the sector. In its introductory section, the survey practically admits that there is a great deal unknown about “the background or demographic characteristics of those who hold… paid positions as managers of volunteers or volunteer programs… or their challenges and needs.” Indeed, along with this would be what kind of compensation exists for the executives themselves.
Still, there is one division of the voluntary sector where salaries are well-documented: charities.
Not a charity case
Lisa Hartford, manager of media relations and communications at Imagine Canada, clears up one bit of the mystery. “Charities report their top salaries in Section D of the T3010 Information Return. These are publicly available via the Charities Directorate of Revenue Canada,” she says. Outside of that, it’s a bit harder to figure out what salary figures get bounced around in the nonprofit realm. But Bob Hamp, director of communications and research at the Canadian Society of Association Executives (CSAE), provides some interesting statistics on salaries in the Canadian charity world.“[In 2005] the average cash compensation for executive directors in registered charities and charitable foundations across Canada was $75,000,” Hamp states. “That was approximately 30% less than CEOs employed by industry associations and professional organizations.” It’s a far cry from the six and seven-figure salaries enjoyed by many for-profit executives.
These figures are slightly higher than those outlined in the 2003 Environics survey. Still, survey numbers are instructional, if only to emphasize the apparent wage disparity between for-profit and nonprofit executives. At the time, the Environics study concluded that 26% of voluntary sector managers earned less than $20,000; 34% earned between $20,000 and $39,900; 13% earned between $40,000 and $59,900, and just one percent earned $60,000 or more.
Making the case for more cash
If there are comparable salary figures for nonprofit executives available for public knowledge, they are not readily found. Still, for her part, Hartford believes nonprofit executives are getting the short end of the salary stick and the long end of a bad rap.
“I've encountered ‘attitude’ about nonprofit management salaries more than once,” she says. “There is a perception that, because one works in the sector, one should be willing to do so for a pittance. The reality is that the charitable and nonprofit sector is increasingly professionalized, and attracts educated and experienced professionals. You want skilled, qualified people running research labs, caring for children, stewarding our environment, raising money for the arts, delivering palliative care... and so on.”
In order to do that, says Hartford, it’s incumbent upon the sector to properly reward, valuate and review its executives in the same manner the for-profit world does.“I believe [nonprofit executive salaries] should be as transparent as for-profit CEOs and senior leaders,” she says. “I suspect that the public would be interested in why the president of a company that manufactures widgets earns millions of dollars a year, while the president of a charity that is working for public benefit earns one-tenth that.”
Hamp agrees, but acknowledges it’s an uphill battle for executives in the nonprofit community. “Incentive compensation is uncommon in this sector,” he says. “Approximately 20% of associations seem to offer formal plans. Financial targets carry the heaviest weight as a factor in determining incentive compensation among those who receive it. The board [of directors] determines the incentive amount that rewards superior CEO performance, and the fact that such plans are almost exclusively tied to finances may have something to do with the fact that so few [charities and nonprofits] offer incentive bonuses.”
Keeping the executive ship afloat
So how should nonprofits go about setting salaries to recruit and retain their executives? The HR Council for the Voluntary/Nonprofit Sector advises boards of directors to consider the following:
- Consult salary surveys for comparable salary ranges based on organization type, size, revenue and geographic area.
- Consider the actual experience and qualifications of the executive candidate.
- Ensure your benefits packages are comparable to similar organizations in your range.
- Use more than one source of salary information; this will help avoid any bias found in a single source.
- Determine who the competitors are: what other organizations, agencies, institutions, businesses, quasi-governmental organizations or governments requires staff with the same knowledge and skills.
- Position your salaries relative to that of competitors’ and determine if your organization wants to pay at the going market rate, above market, or below market.
In 2006, the CSAE released their most recent Association Executive Benefit and Compensation Report, based on 1,560 executive-level respondents. The report discovered various facts about nonprofit executive compensation in Canada, some surprising, some mundane. A few examples are:
- The highest executive compensation levels geographically are found in Ottawa and Toronto.
- Conference registration and related travel and cell phones are the top benefits for all executive levels.
- Very few associations provide vehicles for their executives.
- Only 51 to 60% of CEOs determine the compensation level for subordinate executives. (The report mentions that the amount of executive volunteer involvement is still surprisingly high.)
- Incentives are mostly calculated as a percentage of an executive’s salary.
- On average, CEOs who wield some form of policy power in their organization earn up to 75% more than administrative CEOs
- Associations with bigger revenues can afford to remunerate their executives more.
- Compensation trends for nonprofit executives have see-sawed since 2002 and the CSAE saw a small dip in 2006.
Still foggy after all these years
Though precise statistics remain hard to come by, executive level compensation appears to be on a relative plateau over the last few years as many nonprofit organizations with limited resources struggle to keep their executives, and those with deeper pockets try to figure out ways to compete with for-profits for the best executive candidates available.Andy Levy-Ajzenkopf is president of WordLaunch professional writing services in Toronto. He can be reached at andy@wordlaunch.com
[Editor's Note: For more information about nonprofit compensation, click here.]
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