Becoming a donor to a charity close to your heart is a wonderful thing to do. Anyone who chooses to give away their hard-earned cash to help others - whether a millionaire or a regular wage earner - wants their donation to make a difference and be used wisely.

TUTORIAL: Employee Stock Options

Recent attention given to the high salaries, bonuses and retirement packages of bank CEOs has led to the public wanting to know more about the compensation of directors in the charity sector. Donors are become more concerned about where their money is going. We'll look at the highest paid CEOs in the charity sector and whether they should be earning so much. (For related reading see A Guide To CEO Compensation.)

Charity CEO - a Moral Duty?
The argument is that Charity CEOs should be treated like their equivalents in the private sectors and that charities must offer big salaries to tempt top management talent over to the charity side. But is this the case?

Surely there is a difference between working for a charity and a private company. Charities are not just in business to deliver services or a product for a profit. What sets working for a charity apart is mission and motivation. People join charities to express their support, either as donors, volunteers, staff, trustees or even chief executives. If you are recruited by a charity, then hopefully you are accepting a job that is aligned with your values.

There are, of course, members of the public who think that everyone who works for a charity should be volunteering. This is unrealistic and charities must pay decent wages. Charities are run by professionals, and an effective CEO should be able to deliver the results that the donors want - improving the charity's effectiveness, optimizing fundraising's return on investment and ensuring the charity is delivering on its mission.

But money-driven hiring does not seem to be the answer. If charities want to recruit and retain the best leaders to run what are large and complex organizations, then they will have to offer a reasonable salary. However, they also need to find other creative ways of showing that they are able to compete for talent and attract people who are on board with their charitable mission. (The proxy statement can help determine whether a CEO is well compensated or just overpaid. For more, see Executive Compensation: How Much Is Too Much?)

Top 5 CEO Salaries
So, what is too high a salary and what figures are we talking about?

Popular charity-tracking site has produced a report on the compensation of CEOs in the charity world - a report that was motivated by a concern among their users over excessive CEO pay.

Charity Navigator says of this report, "Many donors assume that charity leaders work for free or minimal pay and are shocked to see that they earn six figure salaries. But these well-meaning donors fail to consider that these CEOs are running multi-million dollar operations that endeavor to change the world."

Here are the top 5 CEO salaries according to their report.

Michael Kaiser, The John F. KennedyCenter for the Performing Arts
Salary (2008): $1,091,444
The Kennedy Center in Washington, D.C. is a performance space that hosts more than 2,000 performances each year, promoting all types of music, theater, dance, opera and film.

Thomas Krens, Solomon R., Guggenheim Foundation
Salary (2008): $1,716,343
Under Krens' guidance, the foundation saw a six-fold increase in the museum's endowment. His thanks was a large severance package in 2008 that made him the fourth highest-compensated CEO in the charity-world that year.

Donald Johnson, Evans Scholars Foundation
Salary (2008): $2,049,976
The Evans Scholars Foundation was created in 1930 to support golf caddies with the provision of college scholarships. Donald Johnson collected more than $2 million in 2008. However his salary in 2007 was only $195,000. Such a huge difference must be due to deferred salary or a retirement bonus, as Johnson left the organization at the end of 2009. (For related reading, see Lifting The Lid On CEO Compensation.)

Glenn D. Lowry, The Museum of Modern Art
Compensation (2008): $2,447,882
The Museum of Modern Art is the home of some of America's most significant art holdings. This salary of almost $2.5 million reflects a hefty contract renewal bonus offered to Lowry. His 2007 salary was still a seven figures at $1,264,818.

Zarin Mehta, New York Philharmonic
Salary (2008): $2,649,540
At the top of the list is Zarin Mehta, the president of the New York Philharmonic. This $2.6 million compensation in 2008 looks shocking, but his base salary of less than $1 million may reassure donors that 2008's generosity is not a yearly occurrence. It is however still a sizable paycheck.

TUTORIAL: World's Greatest Investors

Are Charities Spending Our Money Wisely?
So how much should charities spend on the salaries of their CEOs? A few hundred thousand? Surely over $2 million is excessive?

Donors who give to charities solely for tax reasons may be less concerned by these figures. However, if you are giving to support your passion or a mission that resonates with you, you will want your charity dollars to further the charity's aims - not line a corporate fat-cat's pockets. The demands of running a complex organization is a compelling justification for compensation packages intended to attract and retain people who are up to the job. CEOs require vision, strategy and exceptional management ability. But surely some donors might think twice about giving a significant portion of their gifts to an executive paid over 2 million dollars. Perhaps if you want to be a millionaire, you really should go and work for a company that is setting out solely to make a profit. (Could bloated CEO compensation be to blame for the widening gap between the rich and the ultra-rich? For more, see Reining In CEO Rewards.)

Related Articles
  1. Investing Basics

    How Goldman Sachs Transformed Utah Into the 'Wall Street of the West'

    Learn how Goldman Sachs has built a substantial presence in Salt Lake City. Read about another major financial institution also located in the area.
  2. Professionals

    How Hard Is a Career Selling Life Insurance?

    Learn why selling life insurance is a difficult way to make a living, but also how agents who persevere are rewarded down the road with a strong passive income.
  3. Professionals

    Charity or Retirement Saving: Which to Prioritize?

    Financial planners need to help clients with their financial goals but also support them in their philanthropic endeavours.
  4. Investing

    Baby Boomer Philanthropy Shifts Wealth Adviser Focus

    Wealth advisers who integrate philanthropy and finance planning can stand out with baby boomer clients.
  5. Professionals

    What Accounts for One-Third of the Wage Gap

    Women who work full time still make less than men who have the same qualifications. One third of the pay gap may be due to gender bias and discrimination.
  6. Investing

    Hybrid Business: Rise of Nonprofits in Private Sector

    Businesses are embracing a mutually beneficial partnership wherein the ideals of the nonprofit sector are coupled with profit motive and capacity to scale.
  7. Taxes

    Payroll Taxes: Picking Apart Your Paycheck

    Here's what gets deducted from your pay, what your employer pays and where your payroll taxes actually end up.
  8. Investing

    Family Philanthropy: Developing a Cohesive Strategy

    Devising a cohesive family philanthropy strategy requires proper goal alignment, planning, management, procedural rules and constant evaluation.
  9. Professionals

    Career Advice: Investment Banking Vs. Law

    Learn some of the most important differences between a career in investment banking and law, and figure out which career suits you better.
  10. Personal Finance

    How Salary Experts Evaluate Stay-at-Home Moms

    Thinking about staying home with your little ones? Computing the replacement cost of your domestic duties can help you make a more informed decision.
  1. Does working capital include salaries?

    A company accrues unpaid salaries on its balance sheet as part of accounts payable, which is a current liability account, ... Read Full Answer >>
  2. Do financial advisors need to meet quotas?

    Most financial advisors are required to meet quotas, particularly if they work for firms that pay base salaries or draws ... Read Full Answer >>
  3. What is the difference between AGI (adjusted gross income) and gross income?

    In the United States, individuals pay taxes based on their adjusted gross income, or AGI, rather than their gross income. ... Read Full Answer >>
  4. Does my employer's matching contribution count towards the maximum I can contribute ...

    Contributions to 401(k) plans come from employee salary deferral and employer match dollars. According to the IRS, employees ... Read Full Answer >>
  5. How is marginal propensity to save calculated?

    Marginal propensity to save is used in Keynesian macroeconomics to quantify the relationship between changes in income and ... Read Full Answer >>
  6. How can minimum wages contribute to a market failure?

    The minimum wage acts like a price floor on labor, reducing the supply of jobs available to a level below the market-clearing ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Ex Works (EXW)

    An international trade term requiring the seller to make goods ready for pickup at his or her own place of business. All ...
  2. Letter of Intent - LOI

    A document outlining the terms of an agreement before it is finalized. LOIs are usually not legally binding in their entirety. ...
  3. Purchasing Power

    The value of a currency expressed in terms of the amount of goods or services that one unit of money can buy. Purchasing ...
  4. Real Estate Investment Trust - REIT

    A REIT is a type of security that invests in real estate through property or mortgages and often trades on major exchanges ...
  5. Section 1231 Property

    A tax term relating to depreciable business property that has been held for over a year. Section 1231 property includes buildings, ...
  6. Term Deposit

    A deposit held at a financial institution that has a fixed term, and guarantees return of principal.
Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!