Nonprofits pay for top talent

Compensation can reach into the hundreds of thousands of dollars. Experts say the public might question how much CEOs of major nonprofits should earn. But some counter that Habitat for Humanity, CARE and others are complex organizations with global operations, and that nonprofit executives could make more money in the for-profit world.

“People are really passionate about this topic,” said Sandra Miniutti of Charity Navigator, which provides financial evaluations of U.S. charities. “When people see executives making significant pay ... many times they’re shocked. I think they have a false impression in their minds that most executives at nonprofits work for free or for very little.”

For example, Jonathan T.M. Reckford, CEO of Habitat for Humanity, which provides affordable housing in the U.S. and more than 80 other nations, received total compensation of $266,422 in fiscal 2011, up from $249,203. His compensation included a transportation allowance of $900, retirement contributions of $7,734 and nontaxable benefits of $6,282. Habitat spokeswoman Nakia Fowler said the nonprofit’s board of directors’ executive committee approves the CEO’s salary, which is based on performance and the market average of CEO salaries of similar-sized U.S.-based international nonprofits. Revenues, though, fell by nearly 2 percent from fiscal 2010 to fiscal 2011.

As the economy soured, Habitat’s senior leadership voluntarily took a salary cut in 2009. Fowler said salaries were restored in 2010 as the economy began to rebound.

Here’s a look at others:

● Atlanta-based Arthritis Foundation’s president and CEO, Dr. John H. Klippel, received total compensation, including retirement and health benefits, of $498,457 in 2010, up from $441,411 in 2009. Revenues for that same period were $111.59 million in 2010, down slightly from $117.14 million in 2009

● For the fiscal year ended June 30, 2011, Dr. Helene Gayle, CEO of the humanitarian organization CARE, which had revenues of $582.01 million, received $430,183 in total compensation, compared to $428,802 for the fiscal year that ended June 30, 2010, and $405,754 for the fiscal year ended June 30, 2009. During 2009, Gayle took an 8 percent cut in salary from January through June. The cut was increased to 10 percent in July. CARE also went through a major restructuring, spending cuts and layoffs. A spokeswoman said CARE plans to reinstate merit increases this year as it emerges on a firmer economic footing.

● Milton J. Little Jr., president of the United Way of Metropolitan Atlanta, received total compensation of $456,304 for the fiscal year ended June 30, 2010, compared to $401,369 for the fiscal year ended June 30, 2009. Spokesman David Graves said Little’s compensation is tied to performance, “so based on hard work through an ailing economy, the compensation committee, led by volunteers, determined an increase ... was in order.” During that same period, revenues rose from $79 million to $97.32 million.

● The American Cancer Society’s CEO, Dr. John Seffrin, received total compensation of $764,135 in fiscal year 2011 that included his base salary, deferred compensation and benefits not paid until retirement. He declined an incentive for fiscal 2009 performance and voluntarily decreased his base salary by 6.4 percent the previous period. In fiscal 2010, his total compensation was $2.4 million. Of that, $1.62 million included benefits not paid until retirement and a one-time supplemental benefit that related to retention. Revenues were $953.57 million in fiscal 2011, compared to $956.159 million in fiscal 2010.

It’s common practice for the board of directors to set executives salaries, which typically reflect what similar organizations are paying, said Jose Pagoaga, a partner in the Atlanta office of Mercer, a human resources consulting firm. Over time, compensation would also likely take into account how the organization and the executive have performed. Compensation packages may also include bonuses, retirement and health benefits as well as salary.

“Arguably, the need to compete with the market is not only a strong business rationale but a basis for defending pay,” he said. “In 25 years of doing this, working with hundreds of organizations over that time, I would say that it’s extremely rare that I would look at a package in its totality and conclude that that package was egregious.”

If donors see at least three years of declining revenues and dramatic increases in CEO compensation over the same period of time, he said, “then it’s fair to ask the question, ‘What is going on here?’”

Questions do sometimes arise.

Charity Navigator’s Miniutti said nonprofits are not unlike their for-profit counterparts and must compete for the brightest minds. Compensation may also vary by region and the nature of the work. Generally, nonprofits that work in health, science and education pay comparatively well.

Minuitti said one problem is that there are no set thresholds for pay. “If you get above a $400,000 or $500,000 salary, I think that’s bordering on too much,” she said. “Certainly if you approach $1 million, is that really a charity anymore? You can understand why a donor might get outraged.”

At the Arthritis Foundation, Klipple’s compensation takes into consideration whether he meets certain goals and each year those are rewritten. During challenging economic times, Klipple and others took salary reductions and furlough days. “Absolutely he is compensated fairly,” said board member Cile Perich. “He’s not overpaid at all.”

U.S. Sen. Chuck Grassley, R-Iowa, is among those who have challenged nonprofit compensation.

“The most important factor in setting compensation is whether the board is truly independent and actually scrutinizes the compensation study,” he said in a statement. “If the board is too close to the executives or rubber-stamping salaries without scrutiny, salaries can creep up to levels that might be unacceptable to donors and the public.”

Several years ago Grassley criticized the compensation package of the CEO of the Atlanta-based Boys and Girls Clubs Of America, Roxanne Spillett, who received $998,591 in total compensation in 2008. Her total compensation in 2010 was $609,039, which includes retirement contributions. Factors in Spillett’s compensation, say officials, included more than three decades of service and her doubling the scope of the organization during her tenure. Revenue was $120.55 million in 2010 from $98.92 million the prior year.

The organization said it does not base compensation solely on revenues but also considers the skill base and experience and performance. The compensation level is set by a board of governors, with input from third-party advisers.

The organization’s new CEO, Jim Clark, receives compensation that includes a base salary of $425,000, plus benefits and a potential bonus based on pre-determined performance criteria, according to the nonprofit.

Mark Green, a spokesman for the IRS in Atlanta, said the agency makes compliance checks on nonprofits, including reviewing executive compensation. If a nonprofit awards especially high compensation, it runs the risk of fines or other action.

Michael Batts, who leads the Commission on Accountability and Policy for Religious Organizations, said the biggest concern is not the amount that a CEO is paid but the process by which they’re compensated. The commission, formed at Grassley’s urging, examines financial accountability and transparency at religious and nonprofit organizations.

“I would say that when nonprofits stray from the fold and engage in a behavior that creates the perception of greed or excess, they damage the credibility of the nonprofit sector as a whole,” he said.

PAY BOOST FOR NONPROFIT EXECUTIVES

$498,457 -- Dr. John H. Klippel, Arthritis Foundation’s president and CEO

$456,304 -- Milton J. Little Jr., president of the United Way of Metropolitan Atlanta

$430,183 -- Dr. Helene Gayle, CEO of the humanitarian organization CARE

$764,135 -- Dr. John Seffrin, American Cancer Society CEO

Figures for annual salaries: Klippel’s salary in 2010; Little for fiscal year ended June 30, 2010; Gayle for fiscal year ended June 30, 2011; Seffrin for fiscal year 2011.