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 CharityNavigator.org 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. Entrepreneurship

    Top 10 Side Jobs You Could Start Now

    Ways to make extra cash in your spare time.
  2. Retirement

    Why are 401(k) contributions limited?

    Find out why contributions to 401(k) retirement plans are limited, including what the current contribution limits are and how limits encourage participation.
  3. Stock Analysis

    Why Walmart Raised Its Minimum Wage

    Read about the potential pros and cons of Walmart's promise to increase its minimum starting salary to $10 an hour.
  4. Entrepreneurship

    Millennials Guide: Freelancer vs. Employee

    How to decide if joining the gig economy is right for you.
  5. Savings

    All About Income

    Income is the money you or a business earns by providing goods or services, or through investments.
  6. Insurance

    Healthcare Premiums Keep Rising, But Salaries Aren’t

    Learn how college and health insurance costs have skyrocketed while wages have stagnated, and how, given the necessity of these services, consumers are stuck.
  7. Professionals

    Career Advice: Management Consulting Vs. Law

    Compare the career opportunities between management and law using such criteria as skills needed, starting salary and work-life balance.
  8. Taxes

    Top Tips for Minimizing Taxes on Severance Pay

    A look at the top ways to lessen the tax burden on severance pay.
  9. Professionals

    8 Justifications For Sky-high CEO Salaries

    Why are CEO salaries so astronomically high? There may be more to the story than you think.
  10. Personal Finance

    8 Profitable Majors For The College-Bound In 2015

    Choose your college major wisely to justify the rising cost of higher education. Here are 8 majors that lead to good jobs and high salaries.
RELATED TERMS
  1. Endowment

    A financial asset donation made to a non-profit group or institution ...
  2. Directors And Officers Liability ...

    Directors and officers liability insurance covers you if you're ...
  3. Back Pay

    The amount of salary and other benefits that an employee claims ...
  4. Payroll Card

    A prepaid card onto which an employer loads an employee’s wages ...
  5. Lilly Ledbetter Fair Pay Act

    A federal law designed to ensure equal pay for all workers, regardless ...
  6. Cash Bonus

    A lump sum of money awarded to an employee, either occasionally ...
RELATED FAQS
  1. 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 >>
  2. 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 >>
  3. 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 >>
  4. 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 >>
  5. How does the always be closing (ABC) strategy benefit a salesperson's sales funnel?

    It is good practice in sales to always be closing, because it's common for a salesperson's sales funnel to be leaky. When ... Read Full Answer >>
  6. How does revenue recognition differ between profit and non-profit companies?

    Under the generally accepted accounting principles, or GAAP, for-profit companies recognize revenue as it is earned through ... Read Full Answer >>

You May Also Like

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!