Nearly 30% of Nonprofit Leaders Took a Pay Cut This Year; Pay in 2008 Grew Quickly

Nearly three in 10 of the leaders of the nation’s biggest charities and foundations have taken pay cuts in the past year as the recession causes donations to drop and batters endowments, a Chronicle of Philanthropy survey has found.

The pay cuts come after the earnings of nonprofit leaders changed a median of 7 percent last year, according to The Chronicle’s study of compensation at 325 large nonprofit organizations. That means half of the people in the survey got bigger raises. Half got smaller increases or saw their compensation drop. (A searchable database and other articles based on The Chronicle’s research are available to subscribers or to people who buy a short-term pass.)

The increases that nonprofit leaders received in 2008 are especially noteworthy considering the sharp drop in pay earned by for-profit executives. A survey conducted for The New York Times by Equilar, a San Mateo, Calif., a company that studies executive pay in the for-profit world, found that total compensation dropped by a median of 9 percent in the 2008 fiscal year for executives at the 200 largest companies.

But one of the factors that fueled the long-term climb in compensation for nonprofit executives — the increasing reliance by boards on salary surveys produced by compensation experts — may serve to curb raises in 2009 and future years.

Some 57 charities and foundations — 29 percent of the 195 groups that responded to the question — told The Chronicle that their top executive had taken a pay cut this year due to the recession, declined raises or bonuses, or had his or her pay frozen. The median pay cut was 10 percent.

Given the severity of the downturn, it is surprising that two-thirds of the organizations are not reducing pay for their top executive.

Ken Berger, president of Charity Navigator, a watchdog group in Mahwah, N.J., says explanations for the relative scarcity of cuts could include boards fearing that a pay cut would cause an executive to leave for another job, or selfishness by the chief executives, who typically get first crack at drawing up cost-cutting plans. Charities also may be turning a blind eye to the economy’s troubles.

“A lot of people still haven’t faced the fact that we’re going over a cliff,” Mr. Berger says. “This economic situation we’re in is not over yet. People are hoping that things are going to turn around and it won’t be necessary to be draconian in that way.”

Mr. Berger is among the chief executives in the survey who have not taken a pay cut, although his $140,000 salary has remained flat in his 16 months on the job, and his workload has increased this year with the elimination of the charity’s chief-operating-officer position.

‘It Sends a Message’

At least two of the six most richly paid charity executives — Glenn D. Lowry, director of the Museum of Modern Art, in New York, and Peter Gelb, general manager of the Metropolitan Opera Association, in New York — are taking a pay cut this year (the remaining four did not respond to the pay cut question).

Officials at their organizations say Mr. Lowry’s pay will drop by 15 percent (he made $2,111,882 in 2008, including nearly $1-million in deferred compensation and bonuses that he had earned in prior years) and that Mr. Gelb’s pay will drop by 10 percent (he made $1,045,465).

The survey’s biggest earner, James J. Mongan, chief executive at Partners HealthCare System, in Boston, was paid $2,729,076 in compensation in 2008, of which nearly $1.3-million was deferred compensation.

Among grant makers, the top earner was Jeffrey S. Raikes, the new head of the Bill & Melinda Gates Foundation. He received more than $315,000 for a partial year’s work, or annual pay of $990,000.

Most of the salary increases that show up in this year’s survey were approved back in 2007, when the economy was humming and the stock market was still near its peak.

The median compensation for chief executives at the organizations surveyed was $361,538, based on information from 253 groups that provided data for both 2007 and 2008. In 2007 the median compensation was $330,395.

The Chronicle’s survey was based on the information of 325 organizations that are among those that raised the most money from private sources in 2008 as well as grant makers that held the most in assets that year.

While they represent many of the largest salaries in the nonprofit world, executives at smaller charities — or those that receive large sums from government — could be higher.

Candie Jones contributed to this article.