The British public still see ‘fat cat’ charity CEO salaries as a major source of discontent. Large pay-outs and six figure salaries are often employed in the media to illustrate the supposed moral depravity at the heart of largescale charitable operations in which fat cat bosses’ line their own pockets at the expense of those they purport to serve.
Is the reality always as simple as that though? Research done at nfpSynergy (soon to be released in full) has sought to dig deeper into a debate that has traditionally been condensed into a black and white morality at the top of the sector.
Our January 2020 public survey of 1000 members of the general public found that 72% agreed with the concept of capping CEO salaries within the third sector, and in fact 79% agreed that CEO salaries should be kept under £100,000 per year. The paranoia around personal donations being spent on six figure salaries no doubt contributes to this relatively entrenched public opinion, and in many cases motivates an exodus away from large fundraisers and towards small and medium sized charities. Public opinion is black and white, whilst the sector contains shades of grey.
Does donating to smaller charities guarantee more goes directly to the cause?
Studying the relationship between fundraised income and CEO salary for the top 50 national fundraising charities we can see that this logic is somewhat misguided. In fact, the relationship between the two appears to flatten to the point that large increases in fundraised income have a minor effect on CEO salary.
To illustrate this point, consider the 2019 performance of the following two anonymised charities. Charity A fundraised £449m and their CEO took home £185,000 (an extortionate salary by most public viewpoints). Charity B fundraised £3.2m and their CEO took home £75,000 (a far less contentious salary). However, calculating a ratio from those stats of CEO salary vs fundraised income actually shows that with Charity A, for every £100 fundraised, the CEO takes home 0.04% whereas with Charity B the CEO takes home 2.38% - a much higher percentage despite being a much small charity and paying a lower salary.
Undoubtedly larger charitable organisations by the very nature of their size must spend more on overheads, but the idea so commonly pedalled that donating to smaller charities guarantees that your donation goes more directly to the cause and away from high salaries is relatively fictitious.
Large charities are complex organisations and charity CEOs are comparatively underpaid
The second nuance that ought to be considered is that large charities paying high salaries are themselves complex organisations. Save the Children International, for example, operates across 117 separate countries, often in unstable or dangerous environments, employing 25,000 employees and partnering with numerous local organisations on the ground to achieve their mission. No one could realistically deny that the role of the CEO is both complex and important, and yet the current CEO salary of £189,000 is an eyewatering amount for many members of the public.
When making comparisons with public sector organisations and FTSE 100 companies of a similar size, the disparity between sector pay becomes apparent. The BBC employs around 22,000 employees and CEO Tim Davie earns £525,000, whilst the CEO of Diageo employs around 28,000 and earns an annual salary of £11.7m. Given the complexity of operations that charity bosses are in charge of and the international reach that many manage, they are paid a relatively minor amount when contrasted with organisations of a similar size and scale across other sectors.
Furthermore, resentment towards CEO salaries, in general, is relatively pervasive across the board with recent research at nfpSynergy suggesting £95,000 as the average acceptable salary for the CEO of a bank. This would suggest that actually the largest and more problematic rupturing of social expectation and reality exists in the private sector, and that charity CEOs represent relatively good ‘value for money’.
Let’s persuade the public to focus on efficacy rather than fixate on figures
Of course, this line of argument won’t appeal to all. Many will highlight the fact that charities and FTSE 100 companies are fundamentally not the same beasts and that any form of comparison between an organisation measured in terms of profitability against one grounded in impact is never appropriate.
However, if a FTSE 100 company such as Diageo can justify a £11.7m salary based on the efficacy with which the CEO made the company profitable and competitive, can charity CEOs employ a similar argument grounded in impact delivered? Perhaps this is a dangerous parallel to be drawn but the intention is to illustrate that there appears to be a somewhat hysterical focus on the number of zeros attached to charity CEO salaries, where perhaps greater attention to efficacy and impact could be employed.
With this in mind consider the performance of Save the Children International. In 2018 the organisation reached 40.8m children in need, 9.3m of those reached were through 113 separate emergency responses across 58 countries. They equally reached around 8m through global education programmes. Since 2011 the salary of the CEO has risen by around £25,000 to £188,900, a point many of the public would consider unacceptable. However, considering the magnitude and scale of the above figures as well as the fact that each of those has at the very least doubled, in some cases tripling or quadrupling since 2011, and perhaps that salary doesn’t seem quite so nauseating.
Is our outrage misdirected?
Ultimately there seems to exist a somewhat perverted logic in the way we approach remuneration across society. The collective apathy that surrounds the absurd salaries for FTSE 100 companies (or professional footballers for that matter) flies directly in the face of the outrage so commonly expressed over charity CEO salaries.
Whilst scrutiny into any sort of powerful multimillion-pound organisation is always important, it seems like charity bosses bear the brunt of this scrutiny. The somewhat puritanical societal approach to charity finance means there is a danger that the expectation of what a charity CEO should be paid no longer reflects the complexity of the position, nor the impact being delivered.
The answer, of course, is not to call for a realignment of charity salaries with its corporate counterpart. The answer is surely for the sector to work much hard on explaining why a charity CEO salary of £150,000 is not an outrage but exceptional value for money. Public attitudes will only be changed by a consistent, engaging and long-term campaign to persuade the public that their donations will be better spent with a decently-paid and highly capable charity CEO.
Of course, with Covid-19 making redundancies and pay cuts commonplace across the sector, it is a sensitive time to be making an argument of this nature. Once things return to normal, however, there is certainly a case to be made that we need to consider the value of CEOs and think about remuneration accordingly.
Sadly your blog completely
Sadly your blog completely misses the point. The outrage is not about third sector, public or private sector comparisons but about the disparity of income between charity beneficiaries and CEOs - not just in terms of income but also lifestyle. A charity director myself I stopped supporting Christian Aid some years ago because their tag line was "supporting the poorest of the poor" and I could see no justification for the CEO living a lifestyle which required the support of a six figure salary. The ethics of working with people who manage to feed their family on a few dollars a day whilst you demand a salary in excess of $500 a day is very questionable.
Hi Mark, thanks for your
Hi Mark, thanks for your comments.
I take your point that the disparity in income between CEO salaries and charity beneficiaries can be difficult to make peace with. One of the points the article is trying to make however is that the relentless focus on charity CEO pay seems at odds with our approach to other sectors. In this sense, the CEO of BP (a company at the heart of numerous social, political and environmental problems) can receive upwards of £10m for making that very company profitable and effective, and yet the brunt of the public scrutiny still centers around six-figure charity salaries. Whilst certainly not calling for charity CEO salaries to be raised to such levels, I think our societal ethics concerning where our scrutiny lies is equally questionable.
re comparing chalk with
re comparing chalk with cheese. If the beneficiaries of a company like BP (customers and shareholders) want to object to the CEO's salary they have power. As a customer I buy Esso diesel instead and as a shareholder I vote down the remuneration motion. Charity beneficiaries do not have that power. Fortunately donors do which is why I have stopped giving to some charities and written to them to explain why.
One of the considerations in
One of the considerations in assessing the salaries of CEO's should be the difference between the lowest and the highest paid people in the charity expressed as a ratio. If a charity worker is the lowest paid in the charity and receives £25k for their work and the CEO receives £75k there is a ratio of 1:3 between the lowest and highest paid in the charity. fi we then factor in the minimum wage or better still the Living Wage and kept the ratios to 1:3 or 1:4 or even 1:5 or 1:6 we would have a cap on the CEO that was relational to the rest of the staff and not directed by market forces or the financial value of the charity and its income. so would say this isn't realistic in really complex large charities but I would reply that great charity leaders no matter how large the charity can be forund for less than £100k....its about charity after all not about big business which some of the larger charities seem to have forgotten.
So surely the way to deal
So surely the way to deal with that is to call out, name and shame specific charities where excessive CEO pay is out of line? Also, what are those charities' boards doing to address the matter. They have a legal responsibility to manage the charity's assets properly. Large charities have, or should have, a remuneration committee to set senior salaries. They need to justify them. While I understand and respect the views of those who feel there should be a cap on CEO salaries in charities, you have to take every situation on its own merits. Is the CEO delivering value for money? Also, in the real world, good people always have a choice where they will work, so there is competition for good or outstanding CEO candidates.
A very timely blog, and you
A very timely blog, and you make many good and relevant points.
Some other thoughts and comparisons:
-a) the sector needs to keep demonstrating how charities offer great value for money, compared with - often - the public sector. Some of this is because 'free' resource of volunteers and trustees adds huge value at no additional cost
b) compare the value of a charity CEO with the value of the BBCs top talent - no-one denies that these people do theri jobs well, but is a newsreader really worth upwards of £200K?
c) Charities these days have to be good, efficient and flexible or they simply will not survive. A good CEO who can turn round or save a charity's important work is absolutely worth their salary. There are still far too many non-jobs and vastly overpaid jobs in, say, the NHS and local government upper management. These are taxpayer-funded, unlike charities. so the general public should be much more concerned about this waste of scarce public money.
I am one member of the public
I am one member of the public who has objected to the high salaries, and this article has convinced me that my objection is justified. Firstly, where is the evidence that paying someone say £200,000 results in better performance than paying £100,000, which is where i would be happy to put the limit? £100,000 is a right good salary. They should indeed be paid sufficiently to be able to live a healthy lifestyle without worrying about money, or not being able to do things like pay for home help if they need it.
I do not know of evidence that paying huge salaries actually leads to better performance. Were not all the bankers paid well? Yet they got us into the 2008 crisis. Sheer incompetence, no matter how they spin it. As if that was not enough after that a couple of them got caught in wrong doing and were fined. I am not commenting on the morality of the wrong doing, but on the incompetence of getting caught.
Comparisons with other exorbitant salaries is like saying that because bank robbers steal large amounts of money it would be OK for me to go shop lifting.
Of course there are likely to be savings due to size, so saying that a smaller proportion of income goes on salaries in a larger charity than in a much smaller one doesn't mean anything.
i had a look a while back at a list of salaries in a number of charities and from what i know, which is of course incomplete, some that I admire the most, and who have huge responsibilities, got salaries under £100,000.
Are we really so short of decent people that we have to pay these huge salaries to attract competent CEOs? Are they all in it just for the money? Do they not care about their cause? Is that not a reward? I agree with the comments of Mark Oxbrow above re Christian Aid. I have in the past done collecting for them, but when I learned how much they pay their CEO i felt embarrassed to ask for money for them from people so much less well off. Not poor people by any means. I live in a good neighbourhood. But not that rich either. Christian Aid in particular should follow the teachings of Christ, not greed.
It's a moral question, and that is more important than the actual sums involved.
Hi Tiiu-Imbi, thanks for your
Hi Tiiu-Imbi, thanks for your comments.
It’s interesting to note that NHS doctors and surgeons also perform extremely important public services working on one of the most important social issues, public health, and yet they don’t just do it out of the good of their hearts. It is an important, highly skilled and demanding role and they expect to be financially rewarded for that, often in the form of six-figure salaries (and out of public money I might add). Your expectation that charity bosses performing similarly demanding, challenging and socially important roles should be doing it out of the good of their heart seems an unfair ask if we don’t demand it of other roles. If we accept that doctors and surgeons get paid well and we do not take it as a sign of moral bankruptcy when they do, should we not extend that logic to charity CEOs?
Furthermore, to echo my comments to Mark above, if you want to turn it into a question of morality surely the bigger failure is the failure of collective morality that points the fingers so stringently at charity CEOs whilst failing to address the financial rewards rolled out to companies at the root of numerous social, political and environmental issues. I’m not saying charity CEO salaries should increase, more questioning that rationality and the focus of public outrage.
When one gets a salary of
When one gets a salary of £100,000 that is not asking them to do the job just out of the goodness of their heart. But if there is no goodness in their heart as well then their attitude and values are not compatible with those of any charity worthy of the name. It is bad enough that much of business seems to be ruled and motivated by greed. If the charity sector follows suit we are truly lost. Moreover, I challenge above the notion that even in business huge salaries lead to the best management.