Are non-profit CEOs over-paid?

Disclaimer: I’m about to make a huge generalization. Do with it what you will. I also acknowledge that salaries are typically donor funded in non-profit organizations, and donors often have a big say in what their donations can be spent on.?

Name a reputable non-profit in your area, and I’ll show you a CEO that is probably overpaid.? Now, I’m just talking base salary here; not benefits and perks.?

I’ll give you an example.? I was looking at some salary data for a reputable non-profit (which will remain unnamed, because my goal here is to facilitate a discussion).? The CEO makes nearly half a million dollars per year, which is about $240/hr. The COO makes half of that.? The entry-level person makes $13/hr (if they worked 40 hours per week for 52 weeks would equate to $27,040/year), which is below the local estimated living-wage. The estimated minimum cost of living in this particular state is about $50,000/year.

What the heck happens between being an entry-level employee and CEO that results in such a drastic leap in pay? Let’s get the obvious answers out of the way.? The entry-level position may not require a degree, while the CEO position does. The entry-level position may not require years of experience, but the CEO position does.? More education + more experience = more pay.? I’ll give you that, but the question is HOW MUCH more?

Someone will argue that the CEO has more responsibilities, or has a more stressful job, which is an argument rooted in the value of work.? I’d reckon the company or organization feels the entry-level position is pretty necessary, or it wouldn’t be a position at all.??

We could argue that the loss of the CEO is more likely to throw the organization into disruption/chaos than the loss of the entry-level position, and this is where the conversation gets interesting, because now we’re talking about employee recruitment and retention.? The CEO is offered significantly more pay in order to attract and retain the (ideally) right person for the job, the theory being that a driving force for any CEO to accept and keep their position is the amount of money they earn.? And this is probably true.?

Don’t get me wrong.? I don’t think it’s bad to want to make and have money.? Money symbolizes resources, quality of life, and opportunities. Who, in their right mind, wouldn’t want to have a decent quality of life, resources, and opportunities? Even the entry-level employee wants these things.

Except, the entry-level employee technically can’t afford them at $13/hour, and unlike the CEO, was probably told what the pay would be without the opportunity to negotiate for more. Now, why in the world would someone willingly take on a job that pays below a livable wage? Maybe a small percentage don’t need the money.? Maybe a small percentage don’t want the money.? Looking at the economic data, it’s likely that the highest percentage REALLY need the money, and don’t have other opportunities (due to a lack of job openings, their education, and/or their level of experience).??

So if you think about it, there are really two factors at play here.? The CEO is paid based on how much the organization thinks a CEO would want (remember, I acknowledged that I’m making some broad statements here),? and the entry-level person is paid based on...what? The state-mandated minimum wage?? Maybe a few more dollars to beat out the competition or to give us the feeling that we’re trying to do right by our employees (even though they still won’t be learning enough to live on). At the end of the day, they know they will fill those low-wage positions, because there are enough people out there desperate enough to accept it.?

If we have a scarcity mindset, then we can say the non-profit has a limited amount of funding dollars and has to stretch them as far as they go.? We can also say that there is a cap on how much of the funding dollars can be used on human resources/operating costs.? (I would say that key stakeholders or funders may criticize how much of the donor dollars are used for human resources, but I think we can push back on that a bit when the CEO is making half a million dollars or more in a state where the cost of living is one of the lowest in the country.)

Pondering this, it seems to all boil down to 2 key beliefs.? The organization sets the pay-rate of the CEO based on what the CEO wants, while simultaneously banking on their being a sufficient number of people living in poverty willing to accept low pay.

I’m sure there is someone just squirming in their seat right now, so I will, for the final time, note that I am aware of the generalizations I am making.? :-)?

The thing is, I don’t think these generalizations are too far off base. Afterall, the people who ultimately approve the organization’s budget and pay rates are the Board of Directors, and it is executive-level leadership that informs the board of what the operating expenses/needs are.? What stake do the Board and executive leadership have in the quality of life of their entry-level employees?