Tips for Setting Non-profit Executive Compensation in a Time of Congressional Outrage and Media Scrutiny


This article includes 10 practices that, if followed, will help the boards of tax-exempt organizations such as hospitals, colleges, large foundations, and other charities that require highly compensated executive talent, to explain and justify executive compensation decisions.

As evidenced by the recent media coverage of the salaries paid to CEOs of four non-profits that contract with the government to deliver U.S. foreign aid, nonprofit and foundation compensation continues to be an area of keen interest for the media and for key members of Congress.

While it is true that these salaries are in excess of what a U.S. Cabinet secretary earns, the standard is reasonable compensation in the amount that would ordinarily be paid for similar services by similar enterprises, whether taxable or tax-exempt, under similar circumstances.

Regulators and the media still may not like the result, but if it is based on solid data and the decision is well-researched and conflict free, the board will be in an excellent position to defend its compensation decisions.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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