- The Washington Times - Sunday, September 26, 2004

ASSOCIATED PRESS

Compensation increases in 2003 for the executives who run the largest nonprofit organizations nearly doubled the rate of inflation, the Chronicle of Philanthropy’s annual survey says.

The study, released today, showed that the median salary of 215 chief executives was $291,356. The median is the middle point of that group, meaning 107 leaders made more than that figure and 107 made less.

The publication determined that the middle range of the increases from 2002 to 2003 was 3.7 percent, almost twice the inflation rate of 1.9 percent last year.

Still, the rate of compensation increase was the smallest since 1996, the figures showed.

Salaries of leaders of 309 of the largest nonprofit organizations were reviewed in 2003. Of those, 215 had provided information the previous year and were compared to track growth. The survey does not necessarily reflect all top earners.

The four top earners surveyed worked at hospitals: Harold Varmus, president of the Memorial Sloan-Kettering Cancer Center in New York, and Floyd D. Loop, chief executive of Cleveland Clinic Foundation, both of whom earned $1.7 million in 2003; Herbert Pardes, chief executive of New York-Presbyterian Hospital, $1.3 million; and Peter G. Traber, president of the Baylor College of Medicine, $1.2 million.

Some are keeping a watchful eye on the escalating salaries at nonprofits. The Senate Finance Committee held hearings in June on what its members consider abuses among charitable organizations.

The Internal Revenue Service announced at the hearings it would investigate vigorously “seemingly high compensation” paid to some charity executives and board members.

One worry about high salaries is that donors will stop giving to charities if they consider the salaries of nonprofits’ leaders excessive, said Daniel Borochoff, president of the Chicago-based American Institute of Philanthropy, a nonprofit charity watchdog service.

Mr. Borochoff said nonprofits often pay high salaries simply to keep pace with the salaries paid those in the corporate world.

“There’s a lot of responsibility and a lot of background and experience needed for those jobs,” he said. “The nonprofit needs to hire qualified people.”

For example, those running hospitals deal with large, complicated matters such as insurance and regulatory issues.

Internal Revenue Service rules governing charities and private foundations say they cannot pay executives more than reasonable compensation. Excessive compensation can be penalized by excise taxes. A group’s tax-exempt status can be revoked if trustees, founders, directors or others use the charity for their benefit.

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