Government Nonprofit Policy—How Much More Can the Sector Take?

A recent Star-Ledger article reported that New Jersey Governor Chris Christie proposes limiting state funding for CEO salaries and employee benefits for nonprofits that do business with New Jersey: “Beginning July 1, the state would cap the salaries of the top-earning executives to $141,000, for any nonprofit social service agency with a budget over $20 million.” Gov. Christie believes these measures will have significant cost savings to the state.

Meanwhile, across the Hudson River in New York State, Governor Cuomo has formed an investigative task force to “investigate the executive and administrator compensation levels at not-for-profits that receive taxpayer support from the state….The Governor’s action follows reports of startlingly excessive salaries and compensation packages for executives at not-for-profits that depended on state funding.” The Governor became increasingly involved in this issue as a variety of scandals broke regarding excessive executive pay.

If you ask individuals outside of the nonprofit world, I am sure that the common response to whether the head of a need-based nonprofit should have pay limitations would be yes—especially in our current climate. The challenge to this thinking is that governors and national elected officials are influenced by these scandals. These cases represent a very small number of actual executives. More data would prove that nonprofit executives earn much less than the amounts that are arousing public policy momentum. According to the 2010 Guidestar Compensation Study, human service executives earned a median annual pay of just over $122K. What is more interesting is that of the over 3,000 nonprofits surveyed, just 0.004% earned more than a million dollars and only 4 percent earned more than $500K, with sizes of organizations peaking in the multi-billions. I would say that this is hardly a national epidemic of nonprofit jet-setting executives.

The larger issue in all of this is that it is that yet again, government having its way with the nonprofit sector. In previous Stanford Social Innovation Review articles, I’ve talked about how the sector is left out of major pieces of legislation and how groups like NPR and Planned Parenthood are under attack. Now there is a focus on executive pay at the state level. Government has routinely picked battles with the nonprofit sector, and the sector has taken a beating—mostly without a fight. The sector holds a great deal of power, but right now, it is not mobilized and therefore carries very little weight.

We need to take these latest battles seriously. I am not sure what other wake up calls we need.

Read more stories by John Brothers.