Ferreri was pointing out the double standard between a business that is solely based on profit making and a model that was based on social good—with no interest in making a profit.
Susan G. Komen, a nonprofit working to end breast cancer, faced public scrutiny when word spread that they were paying their CEO more than $600,000. However, when you do the math, that salary is less than 4% of their entire revenue.
The Apple CEO makes about 9 million. Nobody says anything about that.
A writer from The Street wrote in an article, “When donating to a nonprofit, you like to think that most of your money is going towards its stated goal, and that the nonprofit spends most of its money towards making the world a better place.”
Ferreri was right, this logic is completely irrational. Just because a person chooses a career to alleviate poverty or help illiterate children, they should have barely enough income to survive? Whereas someone who chooses to make profits off of selling the newest and coolest, possibly unnecessary, technology to the most elite of the 1st world should earn an income to throw parties the price of some college students’ tuitions.
The conversation about overhead needs to change. People need to acknowledge that just because a not-for-profit is not supposed to be using donation dollars for salaries—it’s necessary for the people who run the organization and implement change to survive.
Ferreri was so upset when she shared this piece of information, she had to sit back and stop talking to keep herself from rambling in anger. Her reaction to this issue is how we should all be reacting.
Honestly, I hadn’t heard much before about there being controversy surrounding high overhead costs in nonprofits. To start, I don’t think comparing nonprofits to businesses is entirely fair. Nonprofits have an ethical responsibility to ensuring donors’ contributions are well spent, because they rely on donor’s giving charitable donations out of the goodness of their heart. Businesses don’t have this ethical responsibility because their revenue is earned by providing a product or service. That being said, I agree that focusing on Susan G. Komen’s CEO earning $600,000 is unnecessary. I interned in development and fundraising for a nonprofit think-tank in DC, so I have been exposed to how nonprofits finance themselves. I don’t know anything about their CEO personally, but in order to non-profits to attract smart, experienced leadership, they have to create incentive. Their CEO (likely) could have also made the choice to make millions in the private sector, but she probably was more interested in contributing to a greater cause. Non-profits need experienced, well-connected leaders in order to attract wealthy donors. Non-profits are business-like too, and need to spend money to make money, though still for a good cause.
ReplyDeleteI'm torn on this issue. On one hand, as Jordan pointed out, high overhead helps attract talent. Without incentivization, how can one expect to motivate someone capable of running a charity of that size. With that said, ~4% is a tremendous amount to pay to just the CEO of a charity. I understand massive salaries to CEOs of for profit businesses, there's no expectation with money spent past service rendered.
ReplyDeleteWhen it comes to a charity, being able to deliver the highest percentage of profit directly to a cause seems to be the mark of a successful charity, and the expectation of highest delivery of donation possible is what a donor wants, in a sense I see it as the delivered service.
4% is a tremendous amount when considering global charities like Doctors With Border and UNICEF pay their CEOs .06% and .09% respectively.
I agree, spending a lot on overhead is necessary to build a robust and well established charity and I see no reason why 10-20% shouldn't go to the team of people working to maximize the mission implementation of a charity. But when the CEO makes 4 cents for every dollar I donate to an organization, I'd prefer to take my money to another charity.
Having done work for a non-profit company in the past, I know how heavily scrutinized the finances are. Everyone wants to help the cause, but everybody gets offended when the person running the business gets paid for the work that they are doing to help. One fact that I’ve always found interesting is that the College Board is a non-profit organization that pays its CEO $1.3 million per year, yet no one discusses why College Board has non-profit status yet pay such high salaries to their executives. I think that the discussion does need to change so that those in charge of non-profits receive salaries that make it beneficial for them to put all their work into the company.
ReplyDeleteJordan is correct in her comment that nonprofits do need to have some overhead in order to incentivize the best and brightest to want to manage these organizations. While nonprofits are, of course, very different than for-profits in many ways, there is a need for them to start operating more like businesses. As I work towards a minor in Nonprofit Management, I have learned that what this sector really needs is leaders with a business understanding, not just people with altruistic intentions.
ReplyDeleteHowever, as I learned in my Nonprofits Management Course last year, the organizational structure and culture is very unique in the nonprofit sector. Suggesting that those managing these organizations are motivated by salaries is inaccurate, given the very nature of their work. Often times, recognition for achievements, gratitude, and the sense of making a difference are motivators for these philanthropically-driven individuals.
I think that CEOs of nonprofits know what they are getting into when they choose to work in nonprofits. Targeting one specific individual for her salary is obviously not a good use of anyone's time, but still, I do not necessarily think a $600,000 salary is necessary. Those who go into nonprofits should be paid well and have enough to live comfortably but even half of that would be reasonable to meet these needs, in my opinion. Do you think that this would have been less of an issue if the Susan G. Komen organization had been more transparent about their leaderships' salaries?