The Chronicle of Philanthropy has just released the results of its 2009 CEO pay survey (for the full article, click here: Chronicle Survey). While the Chronicle researchers have made reasonable efforts to upgrade the quality of their reporting, the survey is misleading in some important respects.
The biggest problem is a confusion of years. The headline says that median CEO compensation rose by 7% in 2008, when in fact the majority of their data is no more current than June 2008, and data from 22% of the 325 respondents is from 2007. For most people, the impact of the current recession did not really become clear until mid-2008 (the Dow Jones average was above 12,000 on 6/30/08). So few nonprofits would have been slowing down or eliminating normal annual salary increases during the period for which the Chronicle survey measures salary growth.
Yet in their cover story, the Chronicle states that “the large increase in compensation for nonprofit leaders is especially noteworthy considering the sharp drop in pay earned by for-profit executives” and cites an Equilar study to support this claim. But the Equilar study covers the full year 2008, which ended with the Dow Jones average at 8,776, down 27% from the June 30 level. Many corporations’ fiscal years are also calendar years; much of corporate executive compensation comes in the form of stock grants, which of course were not producing expected gains by year-end 2008. So the Chronicle is trying to compare nonprofit compensation increases given during a period of at least apparent economic prosperity with for-profit reductions occurring during a sharp, deep recession. This is hardly fair.
As further evidence of the Chronicle’s bias, they claim that inflation during the period of nonprofit increases was “virtually nonexistent”. The majority of these raises (median of 7%) were given between July 1, 2007 and June 30, 2008, during which period the consumer price index rose by 5%.
In some respects, this survey is done better than others recently published. For example, the researchers excluded from the comparisons employees whose compensation was inflated due to a one-time payment, such as severance or a pension payout. They worked to achieve a representative sample, bringing in organizations who didn’t make their size parameters in under-represented areas. And while I’m not certain of this, they apparently limited the sample only to organizations whose full data was available for both years.
Further, much of their commentary focused on a supplementary survey seeking information on whether nonprofits were freezing or reducing pay this year. Reading the entire article, you do get a fairly good picture of what’s going on with nonprofit executive compensation today.
But this survey again demonstrates the problem with combining research with news. The coverage is more interesting when there are things to criticize – note the photos of 5 well paid executives on page 11 (and Jeff Raikes of the Gates Foundation on page 1) contrasted with the three who took pay cuts shown on page 12. The media should focus on unbiased reporting, and leave compensation surveying to the experts.
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