New York Nonprofit CEO Compensation

Ron Mattocks asked:

The New York Post ran an article on June 8, 2008, titled NY Is #1 In Charity CEO Pay.  The article revealed either an embarrassing lack of understanding on the part of author Bruce Golding, and his editors at the Post, or a deliberate attempt to mislead the public.

Anyone who has ever lived in or visited New York City knows it is expensive.  The cost of living, or operating any business in New York City ranks at the highest levels in any comparisons of major metros.  Those employed by nonprofit organizations pay the same rental rates, the same commuter fees, and the same income taxes as those who work in the for-profit arena.  Nonprofit organizations compete for human resources, and although they cannot typically pay the same rate as for-profits, they must pay at a level proportionate to the local cost of living if they expect to recruit or retain skilled staff.

I find the use of the word “charity” in the headline and throughout the article to be troublesome.  The two specific cases referenced for high salaries paid to CEOs are the Metropolitan Opera and the Museum of Modern Art.  Both are incorporated as nonprofit organizations to serve the public, but not all nonprofit organizations are charities.  Many nonprofits serve the public under the umbrella of nonprofit law on a fee-for-service basis, including hospitals, universities, and even art museums or operas.  Under nonprofit law their tax burden is limited or eliminated, and they can raise capital through tax deductible donations. But that does not make them charities in the truest sense of the word.

True charities, on the other hand, are totally benevolent, serving populations that cannot help themselves nor can they pay a fee-for-service.  The Bowrey Mission, founded in 1878, is a wonderful example of a New York City charity.  During the past year, this nonprofit charity served over 400,000 meals and provided over 80,000 nights of shelter in their efforts to care for the 3,300 men and women living on the streets of New York City without shelter. Executive Director Ed Morgan is a gentle, compassionate man who came to the Bowrey Mission to serve, following a stellar corporate career.  According to the most recent IRS filings, the combined salaries of the top five managers total less than $300,000 (combined) to run this $9 million operation with over 100 employees.

The nonprofit community is a national treasure, and is rich in diversity serving every imaginable need through business models that range from totally benevolent (i.e. charitable) to fee-for-service operations that sustain themselves.  Diligent nonprofit boards take great care to establish executive compensation based on local cost of living, combined with market value of skills and experience based on comparable positions and responsibilities.  For the New York Post to imply that New York’s nonprofit community at large has been irresponsible in executive compensation, and to do so by referencing two highly paid (and appropriately so) nonprofit executives, is to grossly distort reality.  If every nonprofit serving New York City were to close down, government and industry could not fill the gaps, and the city would be in chaos.  We are all beneficiaries of the nonprofit community, and must do all we can to assure its integrity and continuing fiscal well being.

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