May 31, 2001 | Read Time: 5 minutes
New study of salaries at 75,000 charities finds big disparities based on employee’s gender, group’s size and type
Senior female executives at the nation’s nonprofit organizations are routinely paid less than men in similar jobs, according to a new study by GuideStar, a Web site that distributes information about charities.
The disparities can be quite stark: The average male chief executive officer at a nonprofit group with an annual budget of more than $50-million earned 47 percent more than the average female C.E.O. at organizations of similar size in 1998 and 1999. The smallest gap — 21 percent — occurs among nonprofit groups with budgets of $1-million to $2.5-million.
Not only are women paid less when they head organizations of similar size, but they also are far less likely to hold the top jobs at the largest — and best-paying — nonprofit groups, according to the study. While more than half the chief executives of organizations with annual budgets of $500,000 or less are women, fewer than 20 percent of the top executives of organizations with budgets of $25-million or more are female.
Similar differences in pay occur for other top positions, such as chief legal officer, development director, chief financial officer, and chief administrator.
The findings are part of the “GuideStar 2001 Nonprofit Compensation Report.” GuideStar is best known as the Web site of Philanthropic Research, a nonprofit organization that is trying to make the informational tax returns filed by charities widely accessible to the public.
The study is based on a computerized analysis of Form 990 informational tax returns filed for fiscal years 1998 and 1999 by nearly 75,000 charities.
Geography Not Big Factor
Besides comparing compensation ranges within organizations of various budget ranges, the study also looks at salaries within different types of nonprofit groups. Organizations that focus on health care and medical, social-science, or scientific research paid their executives the most. Executives of groups that work in the areas of human services, housing, animal protection, and hunger prevention were paid the least.
Even when the size of those organizations is factored in, considerable differences in compensation exist. The average salary for the chief executive of a small medical-research charity — one with an annual budget of $500,000 or less — was $51,097, while the average pay for the top officer at a similar-size organization that focuses on animal protection was $32,725.
The gap grows even wider among the largest nonprofit groups — those with annual budgets of more than $5-million. The average compensation for the chief executive of a medical-research charity of that size was $232,658, while the pay for the top executive at an antihunger charity in that budget range was $84,028, the lowest in that category.
GuideStar also compared compensation at nonprofit organizations in different locations. In some cases, the study found, the size of an organization’s budget had more of an impact on executive pay than the population and cost of living of the city in which it is located. For example, among arts organizations with annual budgets of $1-million to $5-million, little difference existed in the average salary of chief executives in Albany, N.Y. ($83,984), and New York City ($87,711).
Complying With Federal Law
GuideStar officials said they hope the study will help nonprofit organizations make compensation decisions.
Debra Snider, a GuideStar spokeswoman, said the report could provide guidance to charity officials in trying to comply with federal regulations that are designed to ensure that nonprofit groups are not paying officers unreasonably high salaries. Executive compensation meets the federal rules if an organization can show its pay standards are comparable to those of five other similar organizations. “You need a good comparative study to do that,” Ms. Snider said.
But several experts on executive compensation said that the value of the GuideStar report is limited.
Ann P. Kern, director of the nonprofit practice at Korn/Ferry International, an executive-search firm, said the report is “an enormous oversimplification,” because of limitations of the Form 990 on which it is based. “For example, women tend to job-hop less than men, and people who are promoted from within get less of an increase in compensation than someone who is recruited from the outside,” she said.
Ms. Kern said she was surprised by the findings on gender differences in compensation, because when her company recruits executives for nonprofit clients, it does not find that the clients try to pay women less than men. “I can’t say I’ve ever seen less willingness on the part of one of our clients to spend the dollars on women,” she said. “What our clients are looking for is merit.”
Still, she said the figures showing women are generally paid less than men in the nonprofit sector are disturbing. “If this is accurate, it is very alarming and deserves further examination,” she said.
Hugh Mallon, president of Executive Compensation Concepts, in Baltimore, which advises nonprofit groups on hiring and pay issues, also said that the Form 990 fails to show a number of important factors, such as the amount of experience someone has.
“There are other critical components,” he said, “the person’s knowledge, skills, and ability to effect decisions.” In addition, he said, factors specific to each organization help to determine how much it is willing to pay. Someone hired to turn around an organization that is having financial difficulties, or that is planning a major change in its operation, may need to be paid more than someone at an organization that has a large, steady income base, Mr. Mallon said. The Form 990, he said, “will not allow us to develop those hidden criteria that are more important today in what we pay someone.”
The report will be available June 1, either in a portable document format via GuideStar’s Web site, http://www.guidestar.org; or on a CD-ROM. The portable document format version costs $149 for nonprofit organizations and $299 for others. The CD-ROM version costs $528, or $178 for GuideStar participants — organizations that have provided information about their finances for use on GuideStar’s Web site. A print version will also be available for $598 ($248 for GuideStar participants). A free version of the report, showing samples from various sections, will be available on the organization’s Web site as of June 1. For further information, contact the GuideStar Customer Service Department, 427 Scotland Street, Williamsburg, Va. 23185; (800) 784-9378.
