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Insights into Nonprofit Compensation and Diversity

npo_comp.pngEvery year, both the Council on Foundations and GuideStar publish compensation studies for the philanthropic and broader nonprofit sectors, respectively.  The Council’s Grantmakers Salary and Benefits Survey and GuideStar’s Nonprofit Compensation Report serve multiple important purposes for both the individual organizations that use the data as well as the field as a whole.  The objectives we find most interesting and relevant are related to having tools that promote effective organizational management and improve our understanding of the state of diversity in our field.

Broadly speaking, compensation reports provide information that help organizations set yearly staff increases, budget for new positions, or hire a new staff member.  More specifically, these comprehensive studies give foundations and other charitable organizations data that can be used to set reasonable compensation for their employees, and, in particular, executive staff.

Reasonable compensation can be defined as “what similar persons in similar positions, with similar duties, and similar organizations are paid.” This is important on a number of levels. First, the Internal Revenue Service can impose excise tax penalties whenever unreasonable or excessive compensation is paid to high-level employees of charitable organizations. One of the steps an organization needs to take to avoid these penalties is to obtain appropriate data, which can include current surveys that show compensation levels paid by similar organizations. As we have all seen, cases of excessive and unreasonable compensation can also stir up negative media attention or paint a negative image of the nonprofit sector in the minds of elected officials.  But over and above any legal requirements or public scrutiny, organizational leaders should strive to be good stewards of nonprofit resources. (Council members can see more detailed information here. GuideStar also offers a report on IRS requirements and best practices in this area, which you can download for free here.)

Because the Council and GuideStar look at both employee compensation and demographics, these studies also contribute in significant ways to the ongoing discourse about diversity in the field.  Although the scope and methodology of our studies differ, we have consistently similar findings around the women in CEO positions at foundations and nonprofits, for example, namely that the percentage of female CEOs tends to decline as organization size increases.  In the Council’s 2014 study, women comprised 76 percentof all reported full-time positions and 77 percent of CEOs among grantmakers with less than $5 million in assets. Yet for respondents with assets of $100 to $250 million, the share of female CEOs fell to 50 percent. And among respondents with $1 billion or more in assets, women made up just 28 percent of CEOs. GuideStar’s study has also found that the compensation of female CEOs lags behind those of male CEOs in similar organizations.

The Grantmakers Salary and Benefits results also help us determine how well foundations reflect the communities they serve.  Among participants in the Council’s 2014 study, for example, grantmakers with $2 billion or more in assets reported that 36 percent of full-time staff positions were filled by minorities. In contrast the study found a 27 percent measure for respondents with less than $5 million in assets. Furthermore, 32 percent of program officers and 8 percent of CEOs were minorities among the entire pool of responses. Yet for foundations with $1 billion or more in assets, 45 percent of program officers and 21 percent of CEO positions were minorities. These findings are in line with the findings from multiple years of the Grantmakers Salary & Benefits report.

Given the need for good data to drive organizational management decisions, and the need to tackle tough questions about diversity and equity in our sector, the information in these reports will continue to serve as tools and provide fascinating insights that are vital to conversations within the philanthropic space.

npo_comp_2.pngThe preceding post is by Tonia Bain and Brandolon Barnett. Tonia is the Senior Director of Knowledge and Research at the Council on Foundations.  In this capacity she oversees the Council’s research portfolio, Knowledge Center, and online community platform, the Philanthropy Exchange.  

 

npo_comp_3.pngBrandolon Barnett is a research manager for the Council on Foundations. He manages multiple aspects of the Council’s core research projects working closely with colleague organizations and consultants at the Foundation Center, the Commonfund Institute, and other organizations. 

Topics: Trends Diversity, Equity, and Inclusion DEI