Could Your Charitable Donation Be Funding Fat Paychecks?

February 2009

Posted by WSJ Staff

Dow Jones Newswires’ Shelly Banjo on how donors can research pay for executives at nonprofits

The spotlight on executive compensation, centered lately on banks seeking government handouts, is now on the nonprofit world as donors, regulators and legislators increasingly demand more accountability and detail from hospital chiefs, charity directors, university presidents and other nonprofit executives.

The push for better accountability and more transparency from nonprofit institutions is not new, but has been strengthened in a time of shrinking endowments and donations.

Investment schemes like Bernie Madoff’s –which ensnared more than 100 nonprofits and major donors — and compensation scandals like the United Way of Central Carolina’s chief executive Gloria Pace King, who faced a public relations nightmare over her $1.2 million pay package — have intensified scrutiny and increased donor mistrust.

Defenders of current pay levels say pushing austere compensation packages could make it harder for organizations to attract and retain top talent, especially at such organizations as hospitals and research facilities that compete with the private sector for employees.

Donors who are wary of their charitable gifts landing in executives’ pockets can check out how much chief executives are making at specific charities at, a charity watchdog group.

According to its 2008 CEO Compensation Study, more than 100 chief executives in Charity Navigator’s database made more than $500,000. Eight CEOs earned more than $1 million, including the president of Johns Hopkins University, William R. Brody; the general manager of the Metropolitan Opera in New York, Peter Gelb; and Michael Kaiser, president of the John F. Kennedy Center for the Performing Arts in Washington.

Compensation experts say donors should also examine executive pay in a number of different contexts. Charity Navigator offers donors four criteria donors should use to evaluate pay:

–How does the nonprofit compare to others in its category? Executives running education, health and arts-and-culture nonprofits can earn almost twice the amount earned at human services or environmental agencies.

–How does the nonprofit compare to others of its size? Compensation is typically higher at nonprofits with larger staff and expenses.

–Consider the performance of the charity in relation to the CEO’s pay and as a percentage of the charity’s overall budget.

– Keep an eye out for charities that have given the CEO a loan as well as those that report zero compensation. Such loans could constitute conflicts of interest.

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