New York Nonprofit Press: Capping Compensation

New York Nonprofit Press: Capping Compensation

May 1 2013

by Fred Scaglione
Monday, 29 April 2013


It’s been almost two years since Governor Andrew Cuomo declared war on “excessive” compensation for nonprofit agency executives following a front-page, New York Times article exposing million-dollar-plus pay packages for YAI’s Joel and Phillip Levy.  The Governor immediately appointed a Task Force to investigate the issue, which in turn collected reams of detailed salary and benefit data from thousands of nonprofits with contracts to provide services for New York State.  Then, without ever sharing any of the Task Force’s data or findings, Cuomo included provisions in the FY 2012-13 Executive Budget and issued Executive Order 38 to cap state funded-reimbursement for executive salaries – and even limit what nonprofits with state contracts could pay their executives, regardless of where the money comes from.

The 75% Solution
While the overwhelming majority of New York State’s nonprofits are likely to fall below the $199,000 executive compensation cap, there are certainly many larger and complex provider agencies – particularly downstate – that pay their Executive Directors, CEOs and other key employees more than that level.

Many of these will be relying on the proposed regulations’ “Safe Harbor” provisions which allow agencies to utilize non-State funding sources to pay that portion of an executive’s compensation above the $199,000 cap – provided that the total compensation falls below the 75th percentile.  To satisfy these Safe Harbor requirements, agencies must also ensure that the executive compensation package is assessed and approved by the board of directors, including at least two independent members.

“How do you comply?  How do you recruit and negotiate compensation when you don’t even know what survey you can use?” said Sandra Pace of the executive compensation consulting firm Steven Hall Partners. “It’s one of the biggest frustrations we hear when we talk to people.  They don’t know where the boundaries are.”

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