United Way Scandal Puts New Focus on Nonprofit Pay Levels

The nation’s charities are asking a new question in the wake of the United Way scandal: how much to pay their chief executives.

CEO compensation has been a hot topic lately in the private sector. But questions about executive pay at nonprofit agencies arose after the resignation earlier this year of United Way President William J. Aramony, amid questions about financial matters. His salary was $463,000.

A study by the magazine Chronicle for Philanthropy found that six-figure compensation packages for nonprofit executives are increasingly common--challenging the perception that heads of charities lead lives of sacrifice.

Some observers praise the trend toward larger salaries, contending that more money helps attract top people.

But critics argue that nonprofits are straying from their altruistic roots.

ISSUES: The study listed the compensation of 117 chief executives of leading nonprofit organizations.

Forty-two percent of the salaries ranged from $100,000 to $200,000. Large private foundations, universities and major cultural institutions paid more, and advocacy and social welfare organizations paid less.

Some officials fear a backlash.

“I’m concerned that the focus is on . . . the largest and most sophisticated organizations,” said Carol Barbeito, who is national director of the Applied Research and Development Institute in Colorado and has conducted studies on the issue. “The majority of us are vastly underpaid.”

One such study found that corporate chief executives, even excluding the biggest businesses, make about three times as much as executives of nonprofits do.

Yet others insist high salaries are critical.

“I don’t feel embarrassed about my salary,” said James Bausch, of Save the Children, which conducts child relief operations in more than 40 countries. He earns more than $300,000.

Martin Kraar, who is executive vice president of the Council of Jewish Federations and whose annual salary is $207,645, said his salary “is justified by 27 years of experience, by the total commitment I must make (and by) the breadth of my responsibilities, which is worldwide.”

But critics lament what they see as an increasing gulf in compensation between organizations that raise money and those that actually offer services.

For instance, the executive director of a day-care center funded by the United Way probably makes about $24,000.

The Minnesota Council on Nonprofits reports that no substantial differences exist between the education and skill levels of executives of large fund-raising organizations and heads of the organizations they fund.

OUTLOOK: Observers say organizations have to do a better job defending their pay scales.

“But if donors start finding out that the leaders of the organizations where they’re sending $10 checks are making five times their own salary, they might say, ‘No way, no check,’ ” Stephen Greene of the Chronicle for Philanthropy said.

Some organizations have policies that limit the top salary to a multiple of the lowest salary.

Top Salaries

Non-profit organizations are required to make available the compensation of their highest-paid employees. Some examples: Harold Williams, J. Paul Getty Trust: $509,001 Franklin A. Thomas, Ford Foundation: $422,426 Ben J. Love, Boy Scouts of America: $223,375 Elizabeth H. Dole, American Red Cross: $200,000 James Osborne, Salvation Army: $14,222 Source: Chronicle for Philanthropy