Few Organizations Have Policies to Guide Decisions on Compensation

At MAP International, a Christian international-aid group in Brunswick, Ga., salary decisions are guided by

a written policy that says the organization aims to “limit the differential between the top and bottom of our pay scales to a ratio of 5 to 1.”

The organization appears to have achieved its goal. Michael J. Nyenhuis, the group’s president received $98,102 in compensation last year, while the average employee received slightly more than $60,000, according to the organization’s 2004 return.

“The general idea is that we want to pay fair salaries,” says Mr. Nyenhuis. “We recognize that different types of jobs have different levels of risk and responsibility, and certain jobs require higher salaries than others. But in general we see our staff as a team, so there should be some equity within that salary structure.”

Making sure workers don’t think executives are being overpaid at their expense is critical to an organization’s morale. “When you’re doing the kind of work that we do, with a staff of people who are paid by and large less than they could make in the for-profit sector, people’s commitment to the mission and to the organization are very important,” Mr. Nyenhuis says. “My salary and the salaries of the other highest-paid people are all public. If you’re on the lower-paid rung and you see the difference between your pay and the higher-paid people getting larger, that’s a legitimate morale issue.”

MAP is one of only a handful of organizations that has a formal policy stating the organization’s philosophy on compensation.

Even fewer organizations have policies establishing any link between what their rank-and-file workers are paid and their executives’ compensation.

Some charities say that they try to make sure the pay of their employees is equal to the middle range of compensation at other nonprofit groups.

Habitat for Humanity, for instance, adopted a policy in March that says the group will strive to pay its workers and executives the equivalent of the median of what other nonprofit groups pay. “We want to be at the 50th percentile,” sayd Jae Early, Habitat’s director of compensation, benefits, and human-resources information services. “It’s the same percentage for all jobs.”

Mr. Early said that the group did not make any effort to include in the policy its philosophy on how much the chief executive should receive compared with other workers.

Few Detailed Plans

The policies at other organizations are more vague, often suggesting merely that workers be paid “fair” or “appropriate” salaries. The Boys & Girls Clubs of America, in Atlanta, does not set the pay scales for its affiliates around the country, but it does routinely review them and make recommendations on what constitutes appropriate pay.

“We believe that compensation and competency are hand in hand,” says Ronnie Jenkins, a vice president of Boys & Girls Clubs of America and the person who oversees relations with local affiliates. Staff members from the national organization regularly visit affiliates to analyze whether employees are paid fairly — such as whether they are paid comparably to teachers and people with similar jobs in a particular city or town. The compensation policy does not link worker pay to executive pay.

Some organizations limit their policies to making sure the lowest-paid workers receive what the groups think is a living wage. Georgetown University, in Washington, established a “just employment policy” last year, following several years of campaigns by students and workers for improved compensation for the lowest-paid workers. Julia Bataille, a university spokeswoman, says the new policy requires that no worker be paid less than $13 an hour in wages and benefits, a figure that will rise to $14 an hour next year.

The policy applies only to contract workers — janitors, food-service workers, and others employed by companies Georgetown hires to provide services. That is because a committee studying the issue found that all the university’s employees are already paid at least that much. Ms. Bataille says the new policy will cost the university about $500,000 in extra fees to companies this fiscal year.

Role of Trustees

Some people in the nonprofit world say boards and charities should make more-formal efforts to set policies on pay and articulate their philosophy on compensation.

In June, BoardSource, a nonprofit group in Washington whose mission is to help charitable boards of directors operate efficiently, published a report with 12 principles that “exceptional” boards should follow. One of those principles: Trustees should be involved in setting and approving a nonprofit organization’s compensation philosophy.

“Boards generally think their job stops with the compensation of the CEO, and they don’t think about the importance of human resources,” says Deborah Hechinger, president of BoardSource. “You can’t accomplish your organization’s mission without good people.”

Ms. Hechinger says she realizes that it may be a long time until many groups adopt formal policies; asked to name a charity that already gets its board involved in setting a compensation policy for all employees, Ms. Hechinger said she had no examples.

The National Association of Church Personnel Administrators, in Cincinnati, recommends that employees be paid a “living wage,” says William P. Daly, the association’s surveys director.

“If you’re paying your CEO more than five times more than your lowest-paid worker, you ought to be looking to raise the lowest-paid worker’s salary. If the organization is very large, we recognize the ratio may be seven or eight times.”

That is a standard that many religious and secular human-service organizations do not live up to, says Kim Bobo, executive director of the National Interfaith Committee for Worker Justice, in Chicago. She says that many social-service groups do not pay their workers enough to live on.

“These places on one hand do really terrific, important work, but often the workers themselves in those agencies are struggling just to make ends meet,” she says.

Ms. Bobo said her group, a religious organization focused on improving wages and working conditions for low-income workers, does not have a formal policy linking her salary to its employees’ compensation, but in practice makes sure that executives are never paid more than twice as much as workers. “We don’t have it written down that it can never be higher than that, but that’s what we’ve intentionally done.”