Hospitals and private universities have the most bonus-heavy salary structures for their top employees of any category of nonprofit, followed by public broadcasting, public colleges, and nonprofits focused on children and youths, Chronicle data shows.
Meanwhile, senior-level employees at arts and culture groups, international charities and Jewish foundations generally have compensation packages with the smallest share of income from bonuses.
The data is drawn from the Chronicle of Philanthropy’s online salary database with information on more than 10,600 employees at larger nonprofits — those with more than $35 million in annual donations from private sources — that file their tax information electronically.
Although the pay of nonprofit CEOs and certain other high-profile employees like university athletic coaches often get close scrutiny, the Chronicle database looks at the salaries of all employees listed by nonprofits on their tax forms. The data is from charities’ publicly available, electronically filed IRS Forms 990. Some nonprofits are exempt from e-file requirements, and our data set doesn’t include those organizations.
The IRS requires nonprofits to disclose the pay of employees with total compensation of more than $150,000 annually, as well as certain other “key” employees, such as board members and former staff.
The data is from the most recent salary years available on those forms, either 2016 or 2017.
Competitive Pressure
Across the Chronicle’s entire data set, bonuses make up an average of nearly 14 percent of the total value of the compensation packages paid to key employees. However, that figure is heavily skewed by the data for hospitals and medical centers, where bonuses average approximately 19 percent of the compensation mix. Across the 20 categories of nonprofits in our data set, the median proportion of bonus pay to overall compensation is 7 percent.
Nonprofit salary structures are heavily influenced by competitive pressures, particularly from the for-profit world, says Daniel Borochoff, founder of the charity watchdog group CharityWatch. He cited hospitals and medical centers as examples.
“They have to compete with for-profit hospitals and medical centers for talent and for staffing,” says Borochoff. International groups and others can pay less because there isn’t a for-profit equivalent, he adds.
Additionally, the more easily quantifiable nature of the work done at hospitals and medical centers and colleges and universities may be more conducive to structuring bonuses into a compensation contract, according to Pete Smith, founding partner of SmithPilot, a Washington, D.C.-based compensation consulting firm for nonprofits.
“Bonuses work best where there are good metrics upon which you can base the payment, and hospitals and medical centers are full of metrics. There are metrics all over the place — metrics in quality of services, metrics in events that are bad, and so on,” says Smith. “As you go down this list, you get into softer and softer metrics that can measure mission effectiveness, and it’s softest down in the religious area.”
In other words, says Smith, if you are more like a business than a social-service charity, it’s easier to build a framework for an executive bonus package.
James Finkelstein, professor emeritus of public policy at George Mason University’s Schar School of Policy and Government, agrees. “When you look at the bottom of the list, what you’re generally seeing there are organizations that don’t necessarily operate a business,” says Finkelstein. “Those tend to be in a very different sort of category.”
Judith Wilde, chief operating officer of the Shar School, also noted a general move toward a more corporate atmosphere at many larger nonprofits.
“In our looking at public college and university contracts for presidents, we see them become more and more corporate-like,” says Wilde. “Part of our hypothesis for the reason behind that is there are more corporate types now on the board of trustees for colleges and universities, both public and private, and they’re used to a certain kind of contract.”
Big Discrepancies
The Chronicle’s data reveals big disparities in compensation packages among nonprofit causes.
Across our entire data set, base pay makes up only about 62.7 percent of the compensation paid to key employees, while other sources of pay — such as deferred compensation, bonuses, and nonmonetary compensation — account for 37.3 percent of the compensation mix.
Base pay makes up the smallest proportion of key-employee compensation at hospitals and medical centers, accounting for only 55.2 percent of those employees’ pay, with a mix of bonuses (19.3 percent), deferred compensation, and nontaxable benefits like health care making up the rest.
Base pay makes up the largest proportion of key-employee compensation in Jewish federations, accounting for 86.4 percent of total pay in 2016 and ’17.
