New York-Based Top Executive Pay at Non-Profit Organizations

New York-Based Top Executive Pay at Non-Profit Organizations

July 12 2012

PDF of study

Leaders of mid-sized New York non-profit organizations brought home median pay of $284,698 in 2010, the most recent year for which such data is currently available.  Median total compensation paid to all employees within a single organization was approximately $9.2 million, representing approximately 51% of the median revenues for these organizations.  Total compensation includes base salary, bonus, contributions to benefit and deferred compensation plan and all other compensation as reported in the organization’s Form 990.

This information is based on a review and analysis recently completed by executive compensation consultancy Steven Hall & Partners of 228 New York-based non-profit organizations with revenues ranging from $10 – $58 million.  The review and analysis examined pay and related governance data as disclosed in Form 990s filed with the Internal Revenue Service for the 2010 tax year.

Compensation by Sector
Top executives within the Arts, Culture and Humanities sector were paid at the highest levels amongst the NY Non-Profits, with median 2010 total compensation of $365,820.  In contrast, top executives within the Environmental and Animals sectors were paid at the lowest levels, with median 2010 total compensation of $223,671.  Additional information for each sector reviewed is shown below:

Pay Mix
Unlike their peers at for-profit entities, the bulk of the compensation paid by the NY Non-Profits was delivered in the form of base salaries which comprised 86% of the total median pay package, with bonuses, contributions to retirement programs, other benefits and perquisites making up the difference.  Only 14% of the top executives received a bonus in 2010.  Among those executives who did receive a bonus, the median amount was $30,500.  “Bonus compensation remains a minority practice among the NY Non-Profits,” commented Sandra Pace, leader of the non-profit practice at Steven Hall & Partners.  “Non-profits are hesitant to use bonus programs because they struggle to distill the organization’s altruistic mission into ‘appropriate’, easily quantifiable performance metrics.  However, just like for-profit companies, well designed incentives can provide executives of non-profits with a laser focus on achieving the mission of the organization.  The key is to select performance metrics that do not run afoul of IRS rules, or invite negative public perception.”

Prevalence of Perquisites
Approximately 27% of the NY Non-Profits provided benefits and perquisites to their executives.  The median value among these organizations was $31,642.

While limited public disclosure makes it difficult to assign relative values to each benefit or perquisite, prevalence data for perquisites is available.  Of the NY Non-Profits, the most common perquisite reported was a Housing Allowance.  A limited number of the NY Non-Profits offered perquisites such as payment of executive’s health and social club dues and pay for travel expenses incurred by the executive’s companion.  Prevalence data for the perquisites offered by the NY Non-Profits is shown in the following chart below:

Governance Practices
Steven Hall & Partner’s review and analysis also included the governance practices reported by the NY Non-Profits as they relate to the determination of the top executive’s compensation.  The majority of the NY Non-Profits studied (88%) report that the top executive’s compensation levels are approved either by the Board or Compensation Committee.

Federal and State governments are taking steps to strongly encourage non-profit organizations to approve executive compensation based upon a review of appropriate and comparable compensation data.  Of the NY Non-Profits, 78% of the organizations relied upon one or more sources for comparable compensation data.  Of the NY Non-Profits that relied upon comparable compensation data, 39% relied upon an independent compensation consultant, and 91% relied upon compensation surveys and/ or studies.  Prevalence data for the sources used by these NY Non-Profits is shown in the following diagram below:

“These results mirror our experiences with non-profit clients.  We have observed an increased focus on establishing processes to systematically review, determine and document compensation levels for top executives.  Given the heightened public and political focus on non-profit compensation, these processes empower organizations to operate with greater efficiency and predictability and can help protect the organization and individual Board members against claims that compensation is unreasonable,” commented Ms. Pace.  “These processes are critical to organizations approving pay packages to attract and retain the executive leadership necessary for establishing, implementing and carrying out the mission of the organization.  In addition, we believe all non-profits benefit from a periodic review of these practices and procedures,” Ms. Pace added.

About Steven Hall & Partners
Steven Hall & Partners (“SH&P”) is an independent compensation consulting firm, specializing exclusively in the areas of executive compensation, board remuneration, non-profit compensation and related governance issues.  By focusing solely on this critical and complex segment of the human resources arena, we are able to provide our clients with the highest quality expertise and best counsel available on a practical basis.

SH&P has established a practice dedicated to non-profit compensation because we recognize the unique and particular importance of providing executive compensation consulting to those organizations.  Our clients seek to balance the need to pay competitively to retain talented executives with the desire to honor the organization’s mission and use donor resources responsibly while navigating the waters of public scrutiny and regulatory reforms.  Unlike their peers at public companies, when assessing the reasonableness of compensation, non-profit Boards are faced with a deficit of timely, publicly available compensation data for non-profit organizations.  We strive to partner with our non-profit clients to ensure that they have the tools and information needed to successfully navigate the questions surrounding non-profit executive compensation.  For more information on our non-profit practice, please see “Non-Profit Compensation” on our website at www.shallpartners.com/services/.

Contacting Steven Hall & Partners
This publication is provided by SH&P as a service to clients and colleagues.  The information contained in this publication should not be construed as legal, tax or accounting advice.  Questions regarding the matters discussed in this publication may be directed to the consulting staff listed below.  If you have not received this publication directly from us, you may obtain a copy of any past or future related publications from Kathie Mulroe (212-488-5400; kmulroe@shallpartners.com).

 

Contacts

Sandra Pace
212-488-5400
space@shallpartners.com