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22 charity bosses earn over $1 million a year

At a time when tech industry giants such as Meta, Google, Amazon and Shopify are going through a round of massive layoffs, a lot of scrutiny has been placed on executive pay. News of Google CEO Sundar Pichai’s compensation of $226 million after 12,000 employees were cut has reignited conversations about what is deemed acceptable. While this conversation ebbs and flows within the tech industry, it’s a mainstay in the charity sector. According to Charity Watch, an independent charity watchdog in the United States, 22 US charity bosses earn over $1 million a year. In the UK, a 2021 Telegraph investigation found that more than 270 charities were paying bosses more than the Prime Minister and over 2,500 staff members were earning in excess of £100,000 (equivalent to around $120,000). For many people, this is an emotive topic. But what’s the issue with high executive pay if charities are doing good work?

Waste. It’s not wanted in the corporate sector and is even less tolerable in the charity sector. When a donor gives money to a charity, they want as much of it as possible to go to the people or cause they are supporting. To many people a charity boss earning over $1 million feels like a waste of donation money. Some charities also offer bonuses and incentives similar to the largest tech and banking organizations. There is a general feeling that charity bosses should get paid less, not because they are less capable, but because it’s the charity sector!

But as much as we try to draw a line between industries in which profit is the main objective and the not-for-profit charity sector, similarities abound. It’s likely many people join charities with idealistic visions of wanting to help the world and expecting their co-workers to have similar inclinations. While in many cases this will be true, charities are staffed by humans after all, and will have workers susceptible to office politics, resistance to change and other ‘inefficiencies’ often associated with corporate sector. We cannot reasonably expect charity workers to be perfect, as if they’re a different breed to the existing crop of the workforce. They, too, will have off days. Teams will disagree on the direction of certain projects. And things will go wrong.

Charity workers packing donation items

The main argument is that charities should be doing what they can to reduce waste, and for many people, paying bosses a $2 million or $3 million annual salary is difficult to justify. Charities, of course, are in a difficult position. They need talented executives but also need to assuage public sentiment. For example, seeing Facebook ads for a charity could set people off, thinking that’s what their donation money is being spent on. However it’s likely charities will have done the math. If donation money is going towards ads that bring in more money for the charity, then it’s helping the wider cause. The analogy is the same for a charity CEO. If they are delivering in their capacity as boss, don’t they deserve high compensation? Perhaps reducing pay will lead to a less capable person in charge and ultimately less money donated to the charity.

It’s this argument that keeps executive pay high at the largest charities. Strong leadership is required to keep the charity engine going, and running a large organisation is a daunting undertaking in which compensation has to be large enough to attract the best candidates. Another argument that justifies this level of pay is that charity bosses are taking reduced pay compared to what they could earn elsewhere: “If they worked in other industries at the same level, they’d be earning way more.

And while headlines about the high compensation of charity bosses can impulsively be irksome, the transparency of charities works in their favour. The International Rescue Committee, a humanitarian crisis charity, outlines where donation money is spent; 87% on programme services, 8% on management and 5% on fundraising. For many, knowing that 8p of a £1 donation is going to staff pay makes executive compensation less of a problem. In addition, charities benchmark against each other to have high proportions of donations going to those in need.

House made out of US bank notes

With regards to humanitarian aid, pulling it off is no mean feat. It isn’t simply a process of handing over money to those hit by a disaster. It requires quick planning, delicate execution, contingencies against the unexpected and rigorous evaluation. Add to this the risks faced in the field and one can appreciate that it’s no easy task to lead a charity.

The financial statements of various charities can also help put things into perspective. Oxfam GB’s total income from charitable activities in 2021/2022 was £140.8 million. The CEO’s pay was £120,564, 0.09% of total income. In summing up the salaries of all the ‘key management personnel’, which include the Chief Executive, Financial, Impact, Operating, Support and Transformation Officers, their total compensation made up 0.44% of total income.

One criticism of the public scrutiny of charity sector pay is that it could influence people to seek jobs outside the charity sector. The thought process could go as follows: Why would I want to work for a charity? What incentive would there be for me to advance to a senior position if I have public criticism of my pay constantly over my shoulder? While this is understandable, people’s decisions to work for a charity usually include more factors than just the compensation offered. For many people, the reward of helping others and making a positive impact on the world supersedes concerns about what people will think about their pay, which also happens in other industries anyway. Also the scrutiny of executive pay in the charity sector is much-needed in holding charitable organisations to account. People donate money with the intention of it going to those in need. As such, public scrutiny is an important element in ensuring checks and balances remain in place and that charities continue to prioritise efficiency in their operations.

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