November 27, 2008 | Read Time: 1 minute
Charitable groups receiving support from the city of San Francisco may face limitations on how much they can pay their executive directors.
Legislation proposed this month would prohibit groups from using city funds to pay their leaders if the executives earn more than six times the total compensation of the organization’s lowest-paid salaried employee.
If a charity has staff members who are paid the minimum compensation required by city law (a little more than $11 an hour), the executive director’s annual pay would be capped at $138,000, provided city funds were involved.
Studying Compensation
Supervisor Jake McGoldrick, who wanted to make sure city money was distributed equitably and not used for excessive salaries, proposed the legislation. Earlier this year he asked the city controller’s office to examine charity executive-director pay practices. The review focused on 71 charities with annual budgets of at least $1-million that received at least half of their revenue from the city, and on charities that received $2-million or more from city.
The compensation of leaders studied ranged from $31,757 to more than $478,000. The average pay was $121,400.
The legislation would require charities to report to the city annually how much their leaders are paid and if any city money is involved.
Gene Takagi, a San Francisco lawyer who advises nonprofit organizations, says the proposal could have adverse consequences. “Executives may forgo hiring or maintaining low-salaried full-time employees because it would limit their compensation,” Mr. Takagi wrote in an e-mail message. “Instead, tasks that might be accomplished by such employees might be delegated to higher-paid workers, part-time employees, or outsourced.”
