September 27, 2007

Gap Grows in Salaries for CEO's, Survey Finds

Salaries paid to chief executives of nonprofit organizations with annual budgets of $50-million or more are growing at a much faster rate than pay for leaders of smaller groups — a trend that is further widening an already significant compensation gap between small and large charities.

The median pay increase for the leaders of big nonprofit groups jumped 7.3 percent in 2005, according to a study released last week by GuideStar, an organization that collects the federal tax forms that nonprofit groups use to inform the Internal Revenue Service about their finances and activities.

Those increases were significantly smaller for officials at charities that operate with budgets of less than $50-million, the survey found.

Top executives at charities with annual budgets of $1-million to $2.5-million earned median raises of 4.2 percent — meaning half received bigger increases and half received smaller or no gains.

Meanwhile, the median raise for executive directors at nonprofit groups with annual budgets of $250,000 or less was just 2.1 percent.

At the same time, the salaries of those who work at smaller nonprofit organizations remain a fraction of what those who operate larger charities earn.

The median salary of the top executive at the smallest charities was $38,885, the GuideStar survey found. By comparison, those who oversee charities with annual budgets of $50-million or more earned a median salary of $336,470 — a figure that is nearly nine times the pay at the smallest organizations.

Based on those trends, some observers are concerned that the gulf between what is offered to leaders of smaller organizations and larger groups is expanding.

“It definitely seems like the gap is getting more pronounced,” says Chuck McLean, GuideStar’s vice president of research and the survey’s author. “It sort of reflects what’s going on in the job market at large, where you have incredible, large CEO salaries at large, for-profit companies.

Adds Mr. McLean: “If you have an organization that is a $100-million organization, you probably feel some pressure to make sure your compensation is very attractive. When you are much smaller, there just isn’t wiggle room in the budget.”

Such disparities are common throughout an array of nonprofit jobs, according to the survey, which is based on an analysis of federal tax returns of more than 53,000 nonprofit groups and includes information on 102,400 positions at those organizations.

Gender Gap Shrinks

The GuideStar survey also showed that female executives are continuing to gain ground on their male counterparts. Women who held chief executive officer positions at charities with annual budgets greater than $50-million received a median increase of 8.4 percent in 2005, compared with 7.1 percent for men, the survey found.

That pattern was consistent at other large and midsize organizations in the survey. However, at the smallest organizations — those with annual revenue of less than $250,000 — women earned smaller raises than men.

And while, at most levels, women are earning larger raises, they are still earning significantly less than men who hold the same positions.

Over all, women held 41 percent of the job positions reported in the survey, but they earned just 32 percent of the total compensation reported.

Part of the reason for the difference in pay is that female chief executives are more likely to work at smaller organizations. Females held 50 percent of chief executive officer positions at organizations with budgets of $1-million or less, but only 34 percent at organizations with budgets greater than $1-million.

Pay for women was lower than for men at organizations of all sizes. At organizations with annual budgets between $500,000 and $1-million, male chief executives earned 17.4 percent more than their female counterparts, the survey found.

At organizations larger than $50-million in annual budgets, the gap was even wider, at 25.2 percent.

That difference, however, is far less than it was in 2000, when the pay gap between male and female executives was 45.7 percent.

City Differences

The report also analyzes compensation at different kinds of charities, as well as in different cities. For example, the study found that executives who work for nonprofit groups that focus on specialized or technical knowledge — such as technology or medical research — tend to earn the most money.

Executives who worked for science and technology-research institutes earned the highest median compensation, at $125,947. Those who worked at nonprofit organizations classified as general and rehabilitative health were next on the list, with a median compensation of $117,459.

Those employees who worked at charities that focus on religion and on food and nutrition earned the least, with a median compensation of $67,021 and $67,274, respectively.

Among the 20 largest metropolitan areas, nonprofit executives in the Washington area earned the highest median salary, at $115,800.

The lowest median compensation, according to the study, was in Riverside-San Bernardino, Calif., at $84,000. After adjusting for inflation and cost of living, however, GuideStar determined that executives in Atlanta received the highest salaries, while executives in San Francisco earned the least.

Electronic copies of the report can be downloaded at a cost of $349, while CD-ROM versions cost $449. They can be obtained from the GuideStar Web site or by calling the organization at (800) 784-9378.