Executive Compensation

What constitutes excessive pay for chief executives?

In recent years, excessive executive compensation has become an issue for many nonprofits, because of highly publicized, seemingly excessive nonprofit salaries. For the most part, compensation of nonprofit executives lags far behind the compensation of leaders in business and government. The real challenge for many boards is not how to reign in excessive compensation, but rather how to find the resources to pay appropriate salaries.

To evaluate the appropriateness of executive compensation, consider the following:

  • the size and complexity of the nonprofit;
  • the mission area, geographic location, and financial condition of the organization;
  • the qualifications required for the job; and
  • compensation at comparable organizations.

Excerpted from “What You Should Know About Nonprofits” a joint project of Board Source and Independent Sector.

Additional Resources

  • The Panel on the Nonprofit Sector Report on Transparency, Governance and Accountability, addresses Executive Compensation in their final report to Congress.
  • MANP regularly publishes reports on Maine nonprofit wages and benefits to be used as an objective tool to justify compensation levels.
  • According to the Form 990 requirements, the IRS not only wants to know what salaries are paid but also the process you use to determine compensation levels. The rebuttable presumption procedure is a method that is offered as one by which an organization may ensure it satisfies inquiries by the IRS into the reasonableness of the compensation of its highly-paid influential persons.
  • MANP’s searchable Answer Center includes a variety of articles and resources to help nonprofits establish reasonable executive compensation.
  • MANP’s Nonprofit Job Board includes listings for open nonprofit CEO and executive director positions.