Before you next donate to a charity, see how the organization chooses to spend its money.
While the word “non-profit” evokes images of altruism, the reality is often quite different. Many CEOs of non-profit organizations across the United States actually end up grossing millions of dollars in base salaries and additional benefits each year. Former CEO of the American Cancer Society, John Seffrin, for example, earned $2.2 million during the fiscal year of 2010.
This concerning trend runs across the board when we analyze salaries of large non-profits. CEOs of these organizations are paid around $430,000 on average. Considering the average salary in 2015 of chief executives, even in the private sector, was $185,850, CEOs of the big non-profits appear to be earning three times the national average.
So what’s wrong with a non-profit paying its CEO big bucks?
The most fundamental argument against the generous salaries is the ethical obligations of the organization. A non-profit should help those in need. When a non-profit ends up paying its CEO millions, it diverts a significant portion of funding that, almost by definition of the organization, should be given to those it exists to help. By paying such large salaries, it appears that many non-profits betray their charitable objectives.
Interestingly, the CEO of College Board, David Coleman, earned closed to $800,000 in 2015. College Board is a non-profit that owns the SAT and Advanced Placement Exams, which are taken by students for college admissions. These tests aren’t exactly cheap. Students often end up spending hundreds of dollars preparing for the test with books, classes and retakes. It is reasonable to argue that College Board could cut the CEOs salary and divert funds towards subsidizing the SAT’s for underprivileged students.
Legislators have been quick to catch-on to the reality that executives at non-profits often enjoy better benefits than their colleagues in the private sector. In fact, legislators in Florida and Massachusetts attempted to enact legislation, albeit unsuccessfully, capping the salaries of these CEOs to $130,000 and $500,000 respectively. The IRS states that non-profit CEOs must receive “reasonable compensation.” What constitutes a “reasonable” salary, unfortunately, has been left open to interpretation.
However, considering that non-profits operate in the free market, shouldn’t they be free to decide how much they pay their executives? Those who support multi-million dollar salaries for these executives suggest that higher salaries are an incentive to attract the best talent. By hiring the best executives, the non-profit can perform raise more money and deliver its services more efficiently.
It is also important to note that many non-profits receive significant funding from the federal government. This essentially means that these organizations operate, in part, on taxpayer dollars. To fill the pockets of CEOs with millions of dollars could, very well, be a disservice to hardworking taxpayers.
One notable example is the Boys & Girls Clubs of America (BCGA). The BCGA is partially funded by the government and is tax exempt. As we might have to expect, however, BCGA’s CEO, Roxanne Spillet, also receives a multimillion dollar salary.
Before you next donate to a non-profit, visit Charity Navigator to see how your organization of choice allocates its donation money. Some are more committed than others to helping the needy first and their executives second.
Arin Gerald is a student at Boston University.