The public really do care about charity CEO salaries
In our research with the public through our awareness monitor CAM, we see that how charities spend their money really matters. Of course, there are those who say the public shouldn’t care about overheads and should focus on impact. Well you live in your ivory towers and we will keep trying in the real world that the public inhabit. Again and again and again, the public tell us that the size of CEO salaries, the level of ‘admin’ costs and how their money is used really matters to them.
Is it really surprising that somebody giving up £10 from a pension or a limited salary feels aggrieved when they discover that their money is used to pay a salary many times that of their own? Apparently to Stephen Bubb it is. He said as much on the Today programme. I have no idea what the evidence base is for his assertion that charity CEO salaries don’t worry donors, but my fear is that he doesn’t have one.
We are releasing our evidence on what the public think about these issues in powerpoint format and as a 15 minute video of me presenting the data. You can watch it here. And if you doubt our research, read the comments on the both the Guardian and Telegraph websites. Right-wing plot? Not unless you think Guardian readers are in on the conspiracy.
The sector has been caught like a rabbit in headlights
Just as surprising as the fact that some don’t believe that CEO salaries are a problem is the fact that the sector has been so unprepared and unwilling to defend its salary practices. At times like this, the sector doesn’t seem to exist and it’s every charity for themselves.
A few did a good job of doing interviews – such as Christian Aid and Oxfam – but even then, the key messages were not clear. One interview described the work of the Telegraph as an ‘attack’. It’s a dangerous line indeed to describe publicising a charity CEO’s salary as an attack, particularly coming from charities which are committed to accountability and transparency.
Stephen Bubb’s line of defence appears to be ‘donors don’t care and these are very difficult jobs’. They are very difficult jobs, but I doubt many listeners to any of the interviews went away feeling reassured. An outcry over charity CEO salaries is entirely predictable. Indeed, what has been discussed is just the tip of the iceberg. There are many charities far smaller than Oxfam or Red Cross who pay their CEOs comparable amounts, while there are also many sector employees that aren’t CEOs who earn over £100k.
We need to work out better ways to justify the paying of ‘high’ salaries
I think we need to pay charity CEOs over £100k to get good candidates. I give to more than 10 charities that pay their staff over this amount and have no problem with doing so. However, the arguments that have been used to date to defend these salaries are patchy at best. Here are the ones that I have heard:
- These are very difficult jobs. We need to pay decent salaries to get high calibre CEOs.
- Charity CEOs don’t get paid much compared to almost any other profession
- Our CEO took a pay cut to come and work for us
- We pay less than other similar sized charities
- Our CEO hasn’t had a pay rise for 3 years
- The CEO’s salary is a tiny percentage of our total income
- Our CEO’s salary is benchmarked against a basket of measures
- Our CEO’s salary is based on his/her performance
There are probably a number of other arguments too (we’d love to hear yours - please write them in the comments section). It’s hard to know which of these are persuasive with donors, so later in the year we hope to carry out some focus groups with donors to find out. This should help charities work out the best way to take donors and the public with them.
One thing is for sure; this is not the last time charity CEO salaries or costs will be an issue in the media. At very least next time, the sector and individual charities should be better prepared.
Have we paid enough attention to the issues? Or have we cost ourselves dearly? Have your two penneth and leave us a comment below.
Difficult job being a CEO?
Try being one of the working poor and realise how how much strategy,planning and discipline it requires as the norm!
I am not a CEO, but a corporate fundraiser who came to the sector after over 30years in a senior position in finance.
Charity CEOs have a vast array of accountabilities and responsibilities just like any CEO of a quoted or unquoted company - the clue is in the job title! Invariably they are passionate about the cause they work for, give up much of their private time and will have to be very eloquent at lobbying for their charity or sector and often in direct opposition to changes in government policies.
Given the nature of the job and the expectation that they will fulfil ALL their duties with the same care and professionalism as if they were paid considerably more, then surely the salaries are in the vast majority of cases justifiable!
I've got an entirely pragmatic view to this, which I don't think has been expressed anywhere. Probably because it's not really interesting. However, it goes like this;
1. What you or I think is the 'right' amount of pay for a charity CEO is irrelevant. Charity CEO salaries are set by a labour market of supply and demand for people with the right experience, skills, and networks.
2. The only alternative to this is to regulate charity CEO pay, and by extension, all charity senior management pay. I really don't want a bunch of people in Government to be sitting around determining what the right level of pay is for different types of managers in different types of charities. They're bound to get it wrong, and I'll be paying for their wages with my taxes.
I can't see an alternative. Either accept the results of the labour market, or be willing to pay for regulation and the inefficient results it will bring. Entering an argument about whether the salary is right or wrong is pointless unless you believe regulation is a better answer.
Of course, I would love it if Charity CEOs were paid nothing. To achieve that, we would need sufficient numbers of appropriately qualified people applying for CEO roles and willing to do them without pay. If that were the case, the market would set the salary at zero. But I have yet to see one such application...
I think your dismissal of the political dimension of this is premature. The original article was written by an ambitious Conservative MP. There has so far been no explanation for focusing on the DEC charities yet this debate was quickly followed by the DFiD Minister calling for greater transparency!
Cheers Joe, a great article highlighting the classic perception v reality debate. The fact is that donor perceptions are that charity CEOs are overpaid. I am also interested to see the perception gap between the acceptable and actual pay of people in the private sector (bankers, hospital managers etc).
Market forces do, and will continue to dictate the salaries of top executives in charities. Of course, charity CEO wages have risen in line with the swelling of the size (and responsibility) of some of the largest charities. I am sure many CEOs, after carefully weighing every aspect of their 24/7 job, which are carried out in isolation and can damage ones health, relationships, and invade your privacy will come to the conclusion that their salaries are justified - and I would agree.
But how much is too much? Should we ask the public to vote on how much a doctor, nurse or teacher earns? That would be crazy - but our donors are very central stakeholders to our work. Should we therefore ask our donors to vote (as if they were shareholders) on the compensation package of the CEO? Should charities create a renumeration committee of donors to set pay levels? Should salaries be based on social return? In which case, you may actually see CEO salaries and bonuses rise in high performing charities. I don't know, it all sounds very complicated to me. Perhaps the debate will die down once the economy picks up.
We need to find an objective means, in this highly subjective world, of separating a CEO's pay package from this idea of waste, we need to find a way of bench marking the presentation of certain facts about the way we run the finances of charities. The sector is always saying that they are transparent, but the fact is, we work in a sector which is almost a total mystery to anyone who doesn't work in it.
It is time for sector leaders like ACEVO to truly show us the way. Stop telling us that this doesn't matter to donors (because it really does), stop telling us that CEOs require large salaries to justify running large organisations (we know, but this is so far outside donors day to day perceptions that this argument doesn't work). And start helping us to present an engaging and inspiring message to the outside world. We as a sector have become outstandingly good at communicating real and tangible charitable needs. Lets start employing these skills to reconfigure our own positions.
Besides salaries, CEO's advantages and benefits such as first class flights, five stars world class hotels, and high mission and travel allowances are other aspects that are paid for by Charities.
CEO salaries is certainly one of the major issues the sector needs to address to avoid putting off donors (cross-subsidy of state contracts from charitable funds is another). In my opinion, no-one needs or deserves a 6 figure salary, regardless of what sector they work in or what job they do. The argument that these pay scales are needed to attract the right people is self-fulfilling nonsense - if no-one pays those rates I believe perfectly capable people will still queue up to take the jobs. Falling back on the market rate argument just ignores the issue and ultimately it may well be the donor market that sorts it out by deciding not to give to high wage charities so the sector needs to put it's own house in order.
Jon, you make a number of good comments but I was suprirsed wiht your statement that "those who say the public shouldn’t care about overheads and should focus on impact...live in your ivory towers..." As Head of Measurement and Evaluation at NPC I very much endorse the focus on impact. I thought I have been selling (successfully) monitoring and evalution consulting and research services to charities and funders in a quasi-commercial market. Which ivory tower did you have in mind? There is a growing interest in the importance of impact.
What about trying to achieve the golden triangle of matching salaries with performance and impact. If CEO performance (and that of their senior management colleagues) was made more public, in the same way that a charity publishes an annual report, then the donors would see whether the pay their money funds is justifiable. This would also force Trustees and senior management to justify their actions internally and would be a powerful motivator for CEOs and senior management to do their jobs well. Hey, what about taking this outside the charity sector too, to banks, businesses and the public sector?
Ok, I'll carry on dreaming...
It would be interesting to see what effect on a charity's performance or impact there would be if donors had their way and CEO salaries were reduced to a level acceptable to them. Would CEOs work as hard/perform as well for less? Would they retire/go back to the commercial sector/set up as consultants and be replaced by less capable or inexperienced individuals who are prepared to work for less? And what about donor education? Is that how you use your impact assessment?
always an emotive subject but I'd urge anyone concerned about charity overhead to watch Dan Pallotta's TED talk, which I've put a link to below. The way we think about charities needs to change if we are to achieve our goals. http://www.ted.com/talks/dan_pallotta_the_way_we_think_about_charity_is…
Surely this is not really about CEO pay -- charity bosses are just the latest group to come under the spotlight, following media criticism of "overpaid" bankers, civil servants, MPs, NHS executives etc etc. One of the most fascinating comments I've read on this was saying "I don't mind doctors & consultants being paid these salaries because they've done the training and got the skills, they deserve it." The issue i think is that as a society at the moment we undervalue management and administration, so it will be very difficult to convince donors of the justification for high salaries for these roles. I'm very much looking forward to seeing what your focus groups say ...
If we want a fairer, happier healthier society we need a more egalitarian wage structure. Cahrity CEOs should be leading on trying to achieve this.
The evidence from the finance sector is that paying huge salaries gets you the most self intersted people not the best for the organisation or society.
I used to be a public sector CEO and thought I was overpaid in comparison to my staff - though I was paid less than equivalent third sector jobs.
I now sit on the Board of several charities. I think the senior staff of the largest ones are overpaid in comparison to most people even though they do an outstanding job and could get more elsewhere.
Chassing the free labour market with ever increasing salaries for those at the top is a nonsense that charitieis should be challanging
...and yet still donors donate, volunteers volunteer and corporate partners seek to motivate staff and generate positive PR.
Saying you care about something in a piece of research and having it actually effect your behaviour is two different things; researchers know this. I think petrol prices are disgusting but I'm still buying fuel. I think senior bankers are massively overpaid but I still have a bank account.
So where's the cause and effect evidence, please? And focusing on outcomes is neither a diversion nor an 'excuse' Mr author... it's what the charity sector actually does with the money it generates that drives the overall good we do in the world.
Perhaps less self-agrandising and more direct causal research is required here?
Supply and demand should determine wages (very broadly). There is probably a 'reverse premium' in the NFP sector, where there is a higher supply of people with the right skills at any given wage, which moves CEO salaries down, because of the extra value of working for a good cause. But this only reduces wages incrementally.
If the public want charities to be professional and competent then those charities must have a pool of talent to recruit from that meets those professional standards; the primary way to increase the supply of that talent is by offering better terms & conditions. A charity could offer much lower wages for its CEO but it will find the supply of talent much smaller.
I used to work in local government where there was a similar semi-political attack on CEO pay a couple of years ago.Salaries for execs in local government had been partly driven upwards by the use of professional recruitment firms who communicated to both the organisation and the job seeker the value they were supposedly worth.
Charity CEO pay should be proportionate within his or her charity; there should be a pyramid - and I applaud the charities where the difference between lowest and highest pay is set at a multiple (5, 10, whatever). But the moans I've heard have not been limited to CEO pay; it continues to be administration generally. There seems to be a view that if you give a tenner to a charity, that should go completely to the beneficiaries. And this was among educated people! no thought or appreciation of regulation, or legal requirements or accountability, let alone how you turn that tenner, given in UK, into food for the starving poor in Africa (or research into cancer). It's an old chestnut, but is still out there to be addressed.
Good lord, I think everyone who has made comment here (that gets past the moderator anyway)must be a charity boss or someone hoping to get their finger in that pie! I am one of the foolish people who actually pays out of my pittance salary into what I beleived were justifiable and worthwhile causes. Now knowing that large amounts of the combinded donations are creamed off into lucrative salaries for Charity bosses is disgusting and makes me feel like I have been cheated! all of the sectors where senior managers are being paid ludicrusly large amounts are equally bloated and need reigning in. Whilst some can argue supply and demand sets the wages, no one persons skill and experience can be worth these amounts. Charities are now large and cynical organisations/companies, using heart rendering images to manipulate the public into giving more and more...if they include in their adverts, that some of those donations are going to pay the morgages of large mansions, luxery travel and every other rich mans fancy, my guess is most people would not give one single penny. I am confident that they will like me, walk away. I will stay away until I find a charity that beleives the cause is more important than the fat cat board of directors.
Jon, charities are the last organisations that should lead the way on creating a more egalitarian wage structure!
When a Board wants a CEO, they should assess the value each applicant would bring to the charity, and negotiate hard to pay them as little as possible. Then select the applicant that yields the greatest net value to the charity. If that is the one that requires the highest salary, they should employ them, as that will best fulfill their mission. On any individual case, the charity might get the CEO for a steal, but across the industry, CEO wages will be set at the level that results in the best outcome for charity beneficiaries. Of course, all salaries should be set this way, but it's impractical to do so, and that's why the current salaries for equivalent positions become shorthand for the appropriate rate.
If you want to decrease CEO wages, decrease the value they bring to the organisation. Public outrage at wages is one way to do this as it creates a stronger negative PR risk. Another is to fester employee discontent with senior management salaries, as that would create negative motivation amongst staff. Both would create a negative value to a highly paid CEO, and therefore decrease wages. Of course, they would also harm a charities beneficiaries.
As would deliberately choosing a CEO who will accept lower wages, rather than the one who will bring the greatest net value. To do this, hurts people who need the charities help. To ask charities to lead on egalitarian wage structures is to ask them to put that social good ahead of their own mission.
In a bygone era, corporate CEOs believed that their organisation only had a mandate to exist if they had a positive social contract with their communities. To address egalitarian wage structures, it is corporates who should rediscover this belief and take a lead, not charities.
This blog sums up exactly why the UK and the world in general is in such a poor state. People do not need over £100K salaries to be able to live well in the UK. To pay a CEO of a charity anything above £100K is downright disgusting and a waste of people's contributions. Thats why I no longer give to most charities. I heard the CEO of Oxfam on the radio trying to justify her salary. It made my stomach churn. We in the UK need to go back to basics, ethics and honesty. Not to be told by those supposedly in the know that £100K plus salaries to get the "best" person is acceptable. We all know that this is complete rubbish.
I'm not sure that looking at a CEO's salary in isolation gives a true picture.Perhaps a charities' TOTAL expenditure on salaries and wages gives a figure with which to better appraise things.
Take a look at the RNLI scenario. Their last accounts show 'staff costs'to be 58.6 million.That's a lot of money when you consider that the 4600 lifeboat crew members are volunteers as are 95% of their active supporters. So maybe it's not just the CEO's who should be taken to task.