Similar to for-profit entities, non-profit organizations can be subject to significant scrutiny and push back in regard to their compensation practices. It is important for non-profit organizations to deliver reasonable pay to executives because compensation programs send a strong message to grant makers and individual donors or stakeholders regarding the internal message of the organization. Additionally, the IRS can impose penalties on organizations that fail to provide executives with reasonable compensation.
Good compensation governance is crucial to an organization’s justification that compensation paid to executives is reasonable. Governance measures include annual reviews of pay practices, the use of an independent board or compensation committee, and the documentation of compensation related decision making Furthermore, ensuring that a compensation program is grounded in the organization’s mission statement provides added rationalization of the appropriateness of how executives are paid.
Steven Hall & Partners recently analyzed top executive compensation data and related governance practices for 100 non-profit organizations classified in specific healthcare related sectors with revenues between $5.3 million and $93.2 million. Data was obtained from each organization’s most recent Form 990, which were generally filed with the Internal Revenue Service in Fiscal 2017. The study looks at each organization’s top executive who may be the Executive Director or Chief Executive Officer, and who is not necessarily the highest paid.
Revenue and aggregate compensation statistics for each of the six selected sectors are displayed below:
Among the 100 organizations included in the study:
Median revenue equaled $25.9 million
Median aggregate compensation paid to all employees equaled $14.8 million
Median number of employees equaled 291
For the top executive among the 100 organizations studied:
Median Base Salary was $214,017
Median All Other Compensation was $24,588
Median Total Compensation was $250,055
Download a copy of the study here.