Five top findings from this year’s Nonprofit Compensation Report
Today Candid published the 2020 Nonprofit Compensation Report, the 20th edition in this annual series. The report remains the only large-scale examination of nonprofit executive compensation based entirely on IRS data. This year’s report analyzes fiscal year end 2018 compensation data on 177,542 observations from 113,103 forms filed by nonprofit organizations.
Here are five top findings from the 2020 report:
- The gender gap in CEO compensation persisted.
Median compensation of female nonprofit CEOs continued to lag behind that of their male counterparts. With the exception of the $1 million and $2.5 million budget band, all other budget bands for CEO showed no change or an increase in the size of the gap from 2017 to 2018.
- Female leadership increased.
Women made gains in the percentage of CEOs in organizations of all sizes since 2005. Between 2017 and 2018, the percent of women leading organizations increased by 2 to 3 percentage points in all of the higher budget bands ($5 million and up).
- Incumbent CEO compensation increased steadily.
The median percentage increases for CEOs in 2018 were in line with or slightly higher than the median percentage increases in 2017, regardless of gender or organization size. As has typically been the case, increases were higher at larger organizations. Additionally, females received higher increases than males in all but the highest two budget bands ($25 million and higher).
- Cause area and mission affected compensation.
The type of work that tends to be associated with specialized knowledge and/or large organizations led the way in median compensation. Health, science, and technology nonprofit organizations compensated with highest median salaries. Religion and animal-related organizations brought up the rear.
- More observations since last year.
The number of observations in this year’s report increased in 13 out of 14 title categories.
This year, we used a new classification model to assign title categories. This allowed us to capture 14,689 more observations in the final report, specifically for job titles other than CEO/executive director.
Why it matters
If the IRS finds that a nonprofit has overpaid its executives, it can impose fines on both the executive(s) who received the overpayment and the board members who approved it. A nonprofit’s board can prevent this outcome by taking three steps:
- Approving compensation in advance. The board must also ensure that no one who participates in the decision has a conflict of interest concerning the transaction.
- Basing its decision on comparability data obtained before the compensation is approved.
- Documenting the decision-making process at the time it approves the compensation.
The Nonprofit Compensation Report fulfills the requirement in step 2.
Nonprofits, particularly charities that rely on contributions, must also be able to defend their compensation practices to the public. As the IRS observed in a 2009 study on nonprofit hospital compensation, “For some, there may be a disconnect between what, as members of the public, they might consider reasonable, and what is permitted under the tax law.” Having reliable comparative data on hand can be the difference between maintaining or losing the public’s trust in your organization.