The Nonprofit 1 Percent

Even the do-gooders can seem blind to their own excess

There is no date listed for the meeting, but the tax form is signed by Morse as president/CEO on December 4, 2011—two months after the Daily News article came out and embarrassed the organization. Did the board set his pay so "low" compared with the previous year after the article came out and because of it?

The Guild would not answer the Voice's question on this.

To be fair to Morse, There are many 1-percenters leading nonprofits and tax-exempt religious organizations.

Music therapist Debbie Moran at the piano with the blind GuildCare choir for the last time
Arlene Gottfried
Music therapist Debbie Moran at the piano with the blind GuildCare choir for the last time
From left: Gwen Lee, Dorothy Matthis, Rachel Gonzalez, Daniela Luna, and Vicky McKinney sing gospel at the GuildCare Adult Day Center in Yonkers.
Arlene Gottfried
From left: Gwen Lee, Dorothy Matthis, Rachel Gonzalez, Daniela Luna, and Vicky McKinney sing gospel at the GuildCare Adult Day Center in Yonkers.

In 2009, some congregants at the Riverside Church rebelled over the pay package of its new pastor, Brad R. Braxton, who had been selected by a search committee. The church offered Braxton a $250,000 salary and an overall annual compensation package reportedly worth $600,000, putting him in the 1 percent nationally, but only the 2 percent in New York. Unable to tame his flock over the flap, Braxton resigned after only nine months.

The Susan G. Komen for the Cure foundation drew more attention to its finances than it probably wanted to when it tried to stop funding projects with Planned Parenthood. According to the Los Angeles Times, Komen CEO Nancy Goodman Brinker was compensated $417,171 in 2010, putting her in the top 1 percent nationally and the top 2 percent in Dallas, where the organization is headquartered.

Brinker's pay is completely normal in the nonprofit world, as she heads an organization that raises hundreds of millions annually. Komen for the Cure rakes it in by slapping pink on everything from races to guns to buckets of KFC (as well as by suing anyone else who uses "cure" in their fundraiser). As the Los Angeles Times reported, "Among charities that take in between $200 million and $500 million each year, the average chief executive salary is $430,000, according to CharityWatch."

But what of a nonprofit where the work is with the destitute, and where the bulk of the money comes not from large-scale fundraising, but from government sources? Homes for the Homeless is a nonprofit in the same building as the Voice. In 2009, according to tax records, it received $19,531,261 of its $20,388,962 revenue (about 96 percent) from government grants. A fancy car can often be seen outside our building waiting for the CEO, Ralph Nunez, who, according to tax records for the organization the same year, had a total compensation package of $463,291—which has him in the 1 percent nationally and slumming it with the top 2 percent in the New York metro area.

When Barack Obama ran for the presidency, he encouraged Americans to follow his example as a young man and work as community organizers, presumably by doing work like Homes for the Homeless, whose mission is to "provide homeless families with the opportunities and support necessary to move out of shelter and live independently." But Obama probably didn't anticipate that such work itself would lead to people making more than he does by occupying the Oval Office ($400,000 a year, putting him in the 1 percent nationally and in the Washington, D.C., metro area).

Why do nonprofit boards pay their CEOs so much? As Professor Bruce Kogut of Columbia Business School explains it, one reason is that "the nonprofit sector wants to attract talented CEOs who also could be hired by for-profit firms. To attract talent, competitive salaries are offered.

"That said, nonprofit management is not the same as for-profit—the salary has less risk (it's not tied to profits or stock performance), and the nonprofit environment is overall less fraught with competition. And it cannot be expected that a nonprofit CEO will be paid equivalently to a for-profit CEO (who bears higher risk)."

Another justification for high salaries is that nonprofit CEOs need to run in circles with big donors to raise big bucks. But as Kogut explains: "This is a bad explanation for high salaries. The Metropolitan Museum of Art offers its head an apartment across the museum that surely facilitates dining with donors—but the apartment belongs to the museum. Similarly, a nonprofit can pay the club fees, etc. Paying a salary to support a life cycle is not efficient and not very transparent as the argument for a high salary."

(Another consequence of having to draw support from corporate fundraising is that it can bind nonprofits politically. Numerous nonprofits the Voice spoke with during Occupy Wall Street's height said privately they agreed with the mission, but could not appear in Zuccotti Park for fear of upsetting their banking donors.)

Kogut, asked via e-mail about Morse's pay in 2009, noted: "An 82 percent increase is surely unusual. To be fair, 2008 was a bad economic year where everyone lost revenue. While losing revenue due to an economic recession may not be reason for dismissal, it hardly constitutes reasons for a substantial pay raise.

Kogut added: "There should be transparent reasons for this pay. A president of a university can make $1 million; however, the budget can be several billions of dollars, especially due to hospitals that a university often runs. So $1.5 million by this benchmark seems high."

There's also the issue that the Guild gets a great deal of its money from tax dollars. Might it make sense to compare pay of CEOs of government-bankrolled nonprofits to government salaries? Like Homes for the Homeless, the Guild is largely in the business of processing government funds to provide social services. It is, in essence, a government contractor. And the point of contractors, we're always hearing (even though it's often shown to be untrue), is that they'll lower costs by introducing competition.

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