New Jersey’s move to limit executive director salaries revives nonprofit salary debate

By Katy Snyder

How much is an executive director’s time worth? That’s the question wrought by a law recently passed in New Jersey that caps the amount that nonprofit executive directors whose nonprofits provide social services under state contracts can make. The cap will limit executive salaries at nonprofits to $105,750–$141,000, depending on the budget of the organization.

Highlighted in a New York Times article about the salary caps is the Boys & Girls Club of America (BGCA), which pays its executive director, Roxanne Spillett, close to $1 million in salary and benefits ($510,774 in salary and $477,817 in retirement and other benefits) Spillett’s salary came to light when senators reviewed the organization’s financials while preparing to sign off on a $425 million package of federal grants for the group. Four Republican senators refused to sign off on the grants, asking the BGCA for more details on its spending, according to a Chronicle of Philanthropy article.

Executive compensation was not the only question raised by the senators—the use of past funding, which had been earmarked to start additional Boys and Girls Clubs in underserved areas, travel expenses (which were over $4.4 million for the 2008 tax year) and lobbying expenses for the organization—were all called into question.

While the BCGA supplied responses to all questions raised (which you can read by clicking here) the question of how much a nonprofit executive should be paid is one that is not easy to answer. In response to questions about its executive director’s salary, BGCA said that it “follows guidelines adopted by the IRS to assist nonprofit organizations in this area, including the use of an independent third party to assess the marketplace and determine comparable salary practices, ‘peer comparison’ compensation and benefits and other related trends in the nonprofit sector.”

While some, including BGCA’s board chair, defend Spillett’s high salary (quoted in the Times, BGCA Board Chair Rick Goings said that Spillett’s salary was in line with the massive growth that the organization has undergone in her 14 years as executive director). Reaction to Spillett’s salary has been mixed in the nonprofit world. Rosetta Thurman, a nonprofit consultant and blogger for The Chronicle of Philanthropy calls Spillett’s salary into question, pointing out that executive directors should receive good salaries without them being “excessive.” She also points out that the nonprofit world is not the for-profit world and that million dollar salaries are just not sustainable, could detract donors from making donations, and that instead of heavily compensating just the ED, nonprofits should ensure that all staffers are well-compensated.

Others argue that nonprofit salaries for top organizations with large budgets can and should mirror those of the private sector. In a recent Nonprofit Street Blog, I quoted nonpropfit guru Nancy Lublin, who was defending the high salary paid to some EDs. Lublin said, “Salaries are always a weird topic in our sector. We’re all supposed to be martyrs and we’re supposed to guffaw at huge salaries like Laura Walker’s at WNYC [a public radio station in New York]. But Laura is worth it.” (Walker makes about $500,000 a year, and manages a multi-multi-million dollar budget.) Lublin is not alone in this sentiment. A Forbes article on the topic of nonprofit compensation says that like in the business world, nonprofit leaders must oversee large budgets, but also have to have a commitment to the mission of the organization. Like for-profit businesses, nonprofits can only attract the best EDs with competitive packages, the article argues.

As the Forbes article points out, salaries like those of the BGCA ED are far from the norm. Most nonprofit directors toil away for far less than the average business exec with the same level of responsibility and experience. In my opinion, nonprofit leaders who show results and manage multimillion dollar budgets are worth the big salaries, and their compensation can serve as a reminder to all of the important work that they do. Could more be done to raise the salaries of less high-profile EDs and of worker-bee nonprofit staff? Absolutely.

So what do you think? Do nonprofit leaders deserve compensation that is on par with the for-profit world? Or does the work of nonprofits mandate that their leaders receive more modest salaries?  Let us know by leaving a comment.

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1 Response to New Jersey’s move to limit executive director salaries revives nonprofit salary debate

  1. Pingback: The view from Nonprofit Street in 2011—our top-rated posts | JVA's Nonprofit Street

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