Todays world of business is often overshadowed with news about big banks, large corporations who don't pay employees enough, and CEOs who make up to 300 times more than their average employee. One can argue that these headliners shouldn't be an issue and its the free market at work. But what about companies that aren't in existence to profit for shareholders? Nonprofit organizations use the same corporate structure as for profit corporations but news outlets seem to focus only on companies like General Electric, Ford, Bank of America, etc. Just because nonprofits aren't benefiting shareholders does not mean their governance structure is fool-proof. Two common issues that corporations face are executive compensation and board of director accountability. Companies must make sure the shareholders are content with their CEO compensation package. They must hold their board accountable for all business decisions as well. But since nonprofits don't work for shareholders, how do we make sure CEOs aren't being overpaid and boards are acting in good faith?.
The compensation of a CEO running a charity has become a hot topic in recent years. Donors and even board members are wondering just how much money is too much for a charity's CEO. The free market and competition usually takes care of these issues for organizations that profit for shareholders and the same holds true for nonprofits. First thing first, the public must understand that just because one works for a nonprofit does not mean they are working for free. Some CEOs are running multi-million dollar operations in an effort to change the world and must be compensated for their efforts. Studies by Charity Navigator suggest that most nonprofits pay their CEOs in the low six figures. Now of course there will always be outliers. John Seffrin, CEO of the American Cancer Society, makes over $1 million a year but the ACS generates an enormous amount of revenue and is no easy organization to oversee.
