Getting Rich From Charity

[PK]

Recently I posted about an employee who left Microsoft to start his own charity. It seemed like a "feel good" story about someone who decided to give up a successful corporate life in order to give more to others.  Even though the work his organization is doing benefits many in impoverished areas, I was wrong about his so-called sacrifice for others. It was brought to my attention (thanks to great research by thartley) that the previous Microsoft employee is now making $128,000 per year as President of his own non-profit and lives the high life in San Francisco, when he's not traveling around the world.  Since then I've read many interviews all praising his decision to leave Microsoft, without any of them mentioning the fact that he's profiting from his own charity.  Unfortunately this is not the only case of "corporate greed" making its way into non-profit charitable organizations. Many non-profits have employees, Presidents and CEOs making six and seven figure salaries (plus benefits) all from donations or grants intended to help the less fortunate.

Not every non-profit suffers from this greed. There are some organizations that operate very modestly, paying themselves and their employees enough to have a comfortable life while still being able to provide aid to others, which is very admirable and the way a non-profit should operate. But a lot of the charity organizations seem to think a non-profit is the same as a for-profit corporation. Obviously they are not, but if you check some of the salaries on the following list you'll think your looking at the list of Fortune 500 businesses.

http://charityreports.bbb...ic/All.aspx?bureauID=9999

One of the "non-profit" organizations, setup to help the "youth", had contributions (donations and grants) of $3.3 million last year. (Which is A LOT of money to most charities.)  BUT the CEO/Chairman for that "non-profit" made $383,000 per year, spent $2.8 million in fund raising, and $128,000 in administrative costs. Wait!!! There's no money left for the YOUTH!!!

And there are MANY more who are profiting from other people's generosity. Some are large organizations and some are small. Either way, if someone wants to be rich (nothing wrong with that) then all they need to do is get a job working for a business. But if someone decides to use their skills to help a non-profit then shouldn't they (temporarily) give up their "get rich" goal? If not, then it's like someone deciding to be a teacher because they want to be rich.

In my opinion, there should be a salary cap for employees, Presidents and CEOs of non-profits. Maybe $50k-$90k. Most can live VERY comfortably for less than $90k/year. If they can't live comfortably on that then they obviously are not very good at managing money so they shouldn't be responsible for managing millions and billions of dollars in donations.

What are your thoughts regarding people making it rich from charity?  Are they taking advantage of people's generosity? When you donate do you expect your money to help those living in a shack or those living in a mansion?

[M3R1IN]

Donf you just "love" people who work at not working?
Abuse of the system occurs in so many ways especially in non-profit organizations...
$90K a year for a cap? thats awfully high... I know people who live on $50K per year and have 6 children and still live very comfortably and very well... they live full fruitful lives and still have money left over to save... managing ones money can allow people to live very well... unfortunatley we  live in a world where we can have most anything we want now and pay later... or so we think but we are really just imprisoning ourselves to a life of servitude to our debtors.

Having said this, there are still some virtuous non-profit organizations out there, Isara being a prime example,... I think PK  should be cloned and put at the head of all these corrupt organizations...this is the man I had to beg for weeks to go get a pair of $10 dress shoes so his old tattered ones didnt make him look bad.... This is the man who eats PB & J sandwiches twice a day... This is the man who takes a 14 hour  3rd class train to bangkok when he needs to travel so that he spends $12 on it and not $50 on a plane....talk about frugal... but you know what ?  If more heads of non-profit organizations lived this way and stopped living above the people they are helping their organizations would have a lot more money to to the good that needs to be done.

Thats my 2 cents.

[Ginafish]

I believe the salary cap should extend to all non-profit employees, with the cap rising in accordance with the cost of living. Imagine if a cap had been placed on salaries in 1950 of a livable income of $4,237*? That income would be preposterous in the year 2008, much less 2050. So I would support a median income cap that rose with the cost of living.

When I think of non-profits, I don't only think of charities like Isara but also religious institutions, and other non-profits as well. Here's a list as per a wikipedia article: The exempt purposes set forth in section 501(c)(3) are charitable, religious, educational, scientific, literary, testing for public safety, fostering national or international amateur sports competition, and preventing cruelty to children or animals.

I don't like to see heads of non-profits have incomes that are significantly above the average population, I'd rather see the donations go to the needs that the institution is serving. I understand that money has to be spent in fund raising efforts, I think there is a need to monitor these efforts more closely.

Locally, there are often charity golf tournaments with the cost $100 per head of playing a four man scramble. The participants are sent invitations, provided with goodie bags (most of which are donated items but if some are filled with logo'd items at a cost to the organization), feed a catered meal (sometimes two) and provided drinks, and provided 'complimentary golf carts' etc and of course, awards are distributed in the manner of plaques, or trophies. In the end, the cost of their $100 ticket might equal a donation of $30 - $40. How sad is that? I'd rather see the entire $100 be donated to the cause.

Just such a complicated issue....

*from an article about the 100 years of US Consumer Spending

[Sean]

I agree with everything said above.....


But you have to remember one thing.  In order to realistically compete for the brightest people a large non-profit cannot offer an "average wage".  Large non-profits need CEO's on par with the corporate sector and they cannot compete by offering 50K to do a demanding job that would pay 300K in the private sector. 

The same can be said for doctors.  Most doctors do not deserve 150 dollars for 10 mins of work, they are supposed to be in that profession becuase they want to help people right....  Wrong.  They need these types of high wages because the majority of them would not become doctors if it paid poorly, (ex. lack of qualified intelligent teachers right now because they pay at about the poverty line).

Lets also not forget, PK is a rarity (a diamond in a sea of coal. )  You could try to live off what he does here in the US......except the ILC would be an old refrigerator box and his motorcycle would be a Huffy.

[Mus.]

128K a year, that's almost 11 000 dollars a month. That doesn't seem right at all. Sure he's the CEO of the organization but if he really is whole-heartedly in it to help others you'd think he'd settle for less. It's about the people after all, not about getting a new Merc. Now obviously it's easy for me to say this but I think that if I was in his position I'd at least halve my wages. I just wouldn't feel right getting that kind of money from it.

[PK]

Thanks for the nice comments, Wes and Sean.  Right now Isara is working with very small budgets so its easy to be frugal (it's a necessity). But I hope to get in the habit of being frugal so when we do have larger budgets we're still making every dollar count.

But you have to remember one thing.  In order to realistically compete for the brightest people a large non-profit cannot offer an "average wage".  Large non-profits need CEO's on par with the corporate sector and they cannot compete by offering 50K to do a demanding job that would pay 300K in the private sector.

I understand why they get paid so much. Most CEOs of non-profits are lured away from the private sector and the salary must be competitive.  But I'm not so sure about them being the "brightest". Many CEOs are like movie stars and are hired for their connections and their "name", not necessarily for their business (or acting) skills.  But, even so, $350k/yr is a profit and therefore should not be considered a non-profit.

A lot of the organizations on that list are small non-profits with less than 30 employees and a couple million in funds. Yet the CEOs are being paid $300k+.  Yikes!!!  Some had $1 million in revenue and the CEO was still making $250k. That's not bright, that's stupid! lol  In a "perfect world" the seasoned/experienced CEOs would join a non-profit simply to do something different, challenging, and to help. Most have already made it rich from their success in the private sector anyway so they could easily afford to take a few years off (making $75k/yr at a non-profit). If an exec wants $500k/yr then they should stay in the private sector and be happy. But if they want to work for a non-profit then they should (again in a "perfect world") take the pay cut and be happy.  But it all comes down to greed and, unfortunately, the non-profits (using our donations) are having to pay for the greed of others.

Finding a CEO with a heart of gold isn't easy but it will be far more lucrative for them in the long run. Besides, I am sure some execs would love to prove their business skills by helping a non-profit increase their revenue and decrease their costs, so they can then use the experience to get a higher paying job in the private sector. Or, even more likely, there are people within the organization, who have been there for years, that are far more qualified to run the day-to-day activities than someone brought in from the outside.

People are very resilient. They find a way to get things done. Businesses and non-profits are no different. A charity isn't going to crumble if they don't have a high-paid CEO. Having a cap on non-profit salaries would cause some restructuring, some reorganizing, and some house cleaning (at the top). That's all. Most likely more good could be done because the organizations is leaner and greed has been removed from the equation.

[PK]

Today I've been going down the list of charity organizations and making a database so that we can analyze it later. I've only gone through the A's and I can tell you that it is heart wrenching to see some HUGE salaries on some very small organizations. So far at least 90% of the President's/CEOs of the non-profits are making more than $100,000. I wonder how that compares to the average salary of small business owners in the US.  Would someone like to research that statistic?

[M3R1IN]

one site said that the average in the U.S. for a small business owner is  $233 600 although that is most likely gross income before tax and other expenses... I dont know what the tax bracket is for this income in the U.S.... i heard its like 32%? I would bet that after tax and expenses most would average around the 100K mark.
In Canada... the small business owners make a similar average, but this is just from what I know about the small business owners I have worked for or dealt with in real estate.