What Is the Controversy Surrounding Nonprofit Executive Salaries?

Nonprofit executive salaries are sometimes considered controversial because some nonprofit organizations pay their top executives more than $1 million a year. Many people feel that the high salaries indicate poor misuse of donated funds and greed. Consequently, various states have implemented legal provisions aimed at capping the salaries awarded to top executives in nonprofit organizations.

More than 1.4 million nonprofits are registered in the United States, 632,604 of which are public charities. Nonprofits are mainly funded by federal grants and public donations. Following the release of several annual reports stating that more than 20 nonprofits paid top executives more than $1 million per year in 2010 and 2011, the public was outraged by these high salaries.

Reports revealed that one-third of nonprofits surveyed provided bonuses to their well-paid executives, with the median bonus more than $50,000 in 2010. Median pay for executives at the largest charities and foundations increased 3.8 percent in 2011 to $429,512. The salary revelations prompted New York governor Andrew Cuomo to issue an executive order to limit charities from using state funds to pay salaries of more than $199,000. Other states, such as New Jersey, Florida and Massachusetts, have also made efforts to curb nonprofit executive pay.

However, some people feel that the public outrage is misplaced considering that the reports only reflect data from the 325 highest-funded nonprofits, which represent only 0.02 percent of the 1.4 million registered nonprofits operating in the United States.