As a donor, there are a plethora of factors that will impact your decision to donate to a specific charity. These factors range from how much money a charity uses on programs and services in comparison to administrative expenses, to where the charity is located, or how recognizable the charity name is, only to name a few. Through recent observations, we have seen a growing increase in the importance of one factor in particular regarding donor support. This being, CEO compensation. Many donors find skepticism in donating to charities led by CEOs who are making what they deem to be "excessive" incomes.
Charity Navigator’s most recent CEO Compensation Study, examined about 4,000 U.S based mid-large sized charities. The study revealed that although there are outliers in these statistics, charity CEOs receiving an insanely excessive amount of pay are in the minority. Also, salaries for CEOs often vary greatly based on location of the charity, with CEOs in the Northeast outearning CEOs in the Mountain West by an average of $47,000. The size of a charity plays a large role as well, showing that CEOs managing a larger charity make about $160,000 more than CEOs who run smaller charities. A charity’s mission plays a significant role in CEO compensation, with heads of education charities earning an average of $74,000 more than CEO’s of religious charities.
So now that this information is out to the public, what does this really mean? Well, for one, we do not feature CEO compensation as a facet of our Financial Health ratings, however, we still provide the information as a method of transparency. What we have done, is offered various tips below, which we hope will guide potential donors on how to gauge CEO compensation themselves.
- Obtain comparison data. Use the information provided in our study to compare a CEO's salary to other similarly sized charities, as well as those in the same category and region.
- Our 2015 Metro Market Study provides median CEO salaries for 30 large cities.
- Charity Navigator registered users can compare the CEO salaries of specific charities on their "My Charities" page and on each charity's rating page by clicking on the "Compare These Charities" link.
- Registered users can also access Charity Navigator's Sector Analysis Tool to calculate the average CEO pay by cause and state.
- Find out if the charity has a Compensation Committee
- It is important for charities to conduct independent reviews of their CEO compensation through the use of comparative data. Check out our Accountability & Transparency Methodology so you can determine if a charity follows this best practice.
- If the charity you are considering has not yet been rated by us, then we encourage you to review its Form 990 or contact it directly to inquire if it has a compensation committee in place and how it makes salary decisions.
- Consider the performance of the charity in relation to the CEO's pay.
- If you come across a charity whose CEO pay is higher than other similar charities, don't immediately dismiss that charity's request for funding. You're better off supporting a charity that is fiscally efficient, accountable and transparent, achieving its programmatic goals and paying its CEO well, than a charity that has substandard fiscal health, fails to live up to its mission, but under-pays its CEO.
So before you decide on supporting a particular charity, make sure that you thoroughly analyze the implications of the CEO’s compensation. Paying attention to these tips will help you make the most of the dollars in which you decide to give.