Pay for Leaders at Biggest Charities Rises 6.2%, Chronicle Survey Finds

Editor’s Note: In the print version and an earlier Web version of this article, an incorrect organization was cited as having paid its top officials more than 2 percent of its total income. The correct group is the National Association for the Advancement of Colored People, not the United Negro College Fund.

Top executives at the nation’s largest non-profit organizations received a median pay raise

of 6.2 percent last year, according to The Chronicle’s ninth annual compensation survey.

That means half of the 240 organizations that provided information for 1999 raised what they paid their chief executive by more than that, while half increased it by less.

The median growth rate for 1999 was slightly higher than in 1998, when it was 5.7 percent. After accounting for inflation, the median compensation increase was about 4 percent each year.

Organizations gave somewhat bigger increases to newly hired chief executives than to those who stayed in place. At the 29 organizations that hired new top officers in 1999, the leaders’ pay exceeded that of their predecessors by a median 7.5 percent. By comparison, the median increase for those who remained in their positions in 1999 was 6 percent.

Six organizations paid their chief executives at least 50 percent more in 1999 than the position paid the year before; five of the officials were new to those jobs.

The median compensation for the 248 chief executives in the survey (including eight whose organizations’ most recent information covered fiscal 1998) was $225,924.

Competition Drives Up Pay

The salary increases are being driven largely by the strong economy, which is forcing non-profit organizations to compete with fast-rising salaries paid by businesses, say executive-search experts and other financial consultants.

There are more job openings than talented people to fill them, and “the demand for superior talent is driving salaries at a much faster pace” than in recent years, says James Abruzzo, managing director of the non-profit and e-philanthropy practice at the Strat fordGroup, an executive-search company based in New York.

“Non-profit organizations used to be a decade behind the private sector in creative compensation packages; now they’re 36 months behind and catching up fast,” says Hugh Mallon, chief executive officer of Executive Compensation Concepts, in Baltimore, which advises such groups on benefit planning. “They have to vie for the same talent as the for-profit world.”

For the second straight year, The Chronicle’s survey shows that the nation’s largest non-profit organizations are awarding increases that, in percentage terms, outpace those given to business executives. The American Compensation Association’s annual survey of 2,600 companies in the United States and Canada found that compensation for business executives at all ranks grew 4.5 percent in 1999 — or 2.3 percent when inflation is taken into account.

Highest Salary: $1.4-Million

The organizations included in the survey were selected primarily from The Chronicle’s 1999 Philanthropy 400 list of non-profit groups that raised the most money in private donations. They include hospitals, colleges, charities, and other organizations with incomes ranging from $14.5-million to $4.2-billion.

It also covered 20 private foundations with assets of more than $2-billion.

While the survey covers many of the highest-paid non-profit officials, it does not necessarily include all the top earners. Some less-wealthy groups may pay their executives more money, and some large non-profit organizations such as medical centers are not included in the Philanthropy 400 because they raise relatively little in private donations.

The Chronicle survey found that the highest salaries are concentrated among the wealthiest types of non-profit organizations. Of the 30 chief executives paid $400,000 or more in 1999, eight worked at hospitals, eight at private foundations, and five at major universities. The remaining C.E.O.’s worked for a wide range of other non-profit organizations.

The highest-paid top executive in the survey was Floyd D. Loop, chief executive officer of the Cleveland Clinic Foundation, who was paid $1,482,473 in 1998, the most recent year for which the foundation’s financial information is available.

Chief executives at two other hospitals also received more than $1-million: John W. Rowe, president of Mount Sinai Hospital in New York, earned $1,387,050 in1998 (also the most recent year for which the hospital has financial data available), and Paul A. Marks, who in 1999 was president of Memorial Sloan-Kettering Hospital, in New York, and received $1,205,000 in compensation.

Twenty-seven of the chief executives received pay increases of 20 percent or more. Two dozen were paid benefit packages worth more than $100,000 in 1999.

Only three organizations paid their top executive and other highest-paid official total compensation, benefits, and expense-allowance packages worth more than 2 percent of the groups’ total income.

The San Francisco Opera Association topped that list at 2.6 percent, but only because most of the $942,098 it paid in benefits to its general director, Lofti Mansouri, went into his retirement package; Mr. Mansouri is scheduled to retire at the end of the association’s 2000 fiscal year.

The other two organizations that paid more than 2 percent were the Heritage Foundation and the National Association for the Advancement of Colored People. The Heritage Foundation paid a performance bonus to its top executive, Edwin J. Feulner Jr., of $225,400.

In most cases the top executive was the organization’s highest-paid employee, but at 60 of the groups someone else received the most compensation.

Seventeen of those individuals were doctors — often surgeons — whose compensation included fees from their medical practices.

Others included Duke University’s basketball coach, Mike Krzyzewski, who was paid $521,500, and the Chicago Symphony Orchestra’s music director, Daniel Barenboim, who was paid $576,027 for his administrative duties, plus an additional $593,500 in consulting fees as payment for his on-stage appearances conducting the orchestra.

Largest Increase at Packard

The largest increase in compensation for a top executive was paid by the David and Lucile Packard Foundation, in Los Altos, Calif. In April 1999 the foundation hired Richard T. Schlosberg III as its chief executive officer, replacing Colburn S. Wilbur, who had retired as executive director. Mr. Schlosberg’s annual compensation was $540,103 — 75 percent higher than what Mr. Wilbur had been paid.

George A. Vera, the foundation’s chief financial officer, said the new compensation rate was set after a national executive-search company analyzed what top officials in “positions of similar complexity” were paid.

Mr. Vera pointed out that the foundation has expanded significantly since Mr. Wilbur was hired. Its co-founder, David Packard, died in 1996, leaving the bulk of his fortune to the foundation. Those assets were distributed in 1998, pushing the foundation’s endowment up to more than $9-billion at the time. By the end of 1999, it had grown to $10.4-billion.

“In addition to the asset growth, there was also a corresponding significant increase in grant making and in the number and qualifications of our staff,” Mr. Vera explained.

Mr. Schlosberg’s compensation was based on “the complexity of his responsibilities, the existence of competing opportunities from outside the foundation community, and the fact that needed to relocate his family from the Los Angeles area to Silicon Valley.”

Change in Responsibilities

The second largest increase in compensation reflected a basic change in an organization’s direction. Big Brothers Big Sisters of America decided to change its management structure in 1999 to achieve its goal of vastly expanding the number of children receiving its services.

Judith N. Vredenburgh, who was hired as president, received an annual compensation package of $215,000, compared with the $123,566 paid to the former national executive director, Thomas M. McKenna.

“The board decided to recruit and hire a president/C.E.O. who is also a voting member of the board,” Ms. Vredenburgh said. “It’s a different functional position.” She said her duties include overseeing the internal operation of the national organization as well as working with its 506 affiliates. Mr. McKenna’s position was more narrowly focused on running the national headquarters.

“It means coordinating a more interdependent federation for a huge growth agenda,” said Ms. Vredenburgh. She added that Big Brothers Big Sisters increased the number of children it served by 14 percent last year to 158,000 — its biggest increase ever — and is on its way to a 22-percent jump this year. Its goal is to serve one million children by 2010.

Benefits and Expenses

For the first time, The Chronicle survey asked organizations to break down into salary and other components the compensation payments they reported on the Form 990 informational tax returns they file with the Internal Revenue Service. The survey also asked organizations to provide more precise information concerning benefits and expense allowances listed on the Form 990. Among the key findings from the 164 groups that agreed to provide those details:

• Seventy percent — 116 organizations — reported that 100 percent of what they listed under compensation (not including benefits and expenses) was just salary.
• Cash bonuses were paid to the chief executives at 22 organizations. Four reported bonuses of $100,000 or more.
• Chief executives at 14 organizations received partial reimbursement for housing costs.
• At 38 non-profit groups, the top officer received either the use of a free automobile or partial reimbursement for automobile expenses.
• More than 60 percent of the organizations — 100 — made payments into their top executive’s pension plan, almost all of which was included under benefits. The median payment was $16,000, meaning that the organizations’ pension contribution typically was equal to 7.4 percent of executives’ annual pay.