The Pay Packets of Charity CEOs may be Lower than you Think

The Internal Revenue Service states that nonprofit CEOs should receive “reasonable compensation”, while encouraging their board to compare pay practices at other organizations to assess what “reasonable” means.

Independent watchdog Charity Navigator questioned 4,587 organizations across America, basing its findings on salary data disclosed for the 2014 and 2015 financial years. It found that nonprofit CEOs got an average annual pay increase in 2014 of around 3%.

To put its $123,462 figure in perspective, it’s around a third of what colleagues may be getting paid outside the nonprofit sector, provided they’re not at a publicly listed company.

Private company CEOs received a median total compensation package of $354,750, including bonuses and equity grants, according to Chief Executive’s 2016-2017 CEO and Senior Executive Compensation Report for Private Companies.

CEO’s of publicly listed companies are paid much higher, typically earning in the millions or tens of millions of dollars.

“While reports of excessive nonprofit salaries frequently make the front page, our data tells a very different story,” Charity Navigator CEO Michael Thatcher said. “Analysis into the compensation practices at over 4,500 charities reveals that the vast majority of CEOs receive very reasonable salaries.”

Its report also found that CEO compensation differed depending on the charity’s purpose. CEOs heading nonprofit research organizations, for example, were paid 50% more than colleagues steering human services charities.

And location mattered, too. CEOs at nonprofits in the northeast corner of the country—including cities such as Washington, D.C., New York and Boston—earned higher salaries, while those in the southwest earned the lowest.