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New GuideStar Service for Researching Fair and Reasonable CEO Compensation

GuideStar CEO Compensation Checkpoint takes the labor and stress out of setting fair and reasonable compensation for your organization's CEO.

Ensuring that your CEO's compensation meets the IRS's "fair and reasonable" standard is more important than ever. Consider that:

  • In recent years, the IRS has levied millions of dollars in penalties for excessive compensation at tax-exempt organizations.
  • The new Form 990 requires nonprofits to define their processes for establishing executive compensation, making these details public for all to see.
  • The IRS has said that it will review compensation in every examination it performs on an exempt organization.

Unfortunately, there's no set formula for determining "fair and reasonable"; what meets the standard at one organization may be out of line at another. To establish what is fair and reasonable, an exempt organization must research how much a similar position would earn at a nonprofit that is of the same size and has a similar mission or field of activity.

If you find this a daunting task, take heart: GuideStar CEO Compensation Checkpoint does the work for you. Launched July 30, 2009, this new service analyzes your CEO's compensation within a group of comparable nonprofits. The information is delivered in a report created especially for your organization. The report is dated, allowing you to create an audit trail should the IRS ever question the process your nonprofit used to establish your CEO's compensation.

GuideStar CEO Compensation Checkpoint takes the worry out of complying with IRS regulations on nonprofit CEO compensation, freeing you to focus on accomplishing your organization's mission.

Suzanne E. Coffman, August 2009
© 2009, GuideStar USA, Inc.

Suzanne E. Coffman is GuideStar's director of communications and editor of the Newsletter.

Topics: Products and Services