Profitting From Non-Profits

Scott asks,

"Executives and employees of non-profit organizations can in many cases make a lot of money. (search here for some notable foundation and organization top salaries) It seems like a sham when a non-profit/not for profit exec drives around in $100,000 cars. But also, I don't think someone who manages multi-million dollar organization shouldn't be compensated decently.

Should the fact that someone is running a non-profit vs. for profit organization affect the size of the salary they should receive?

Personally, my gut reaction makes me think non-profit CEOs should take a pay cut because they should include the warm, fuzzy feeling you get working for non-profits (and presumably a deserving cause) as a benefit. But, I haven't been able to find good reason that would either back up or debunk my initial reaction."

There is a knee-jerk reaction that we have to large salaries in general, but deep unease when they are paid to executives of non-profits. Corporate executives draw their salaries off of the profits they accumulate for the shareholders of a corporations and are thereby seen in some way to be sharing in the wealth they generated. But those who run non-profits pull their salaries from donations that were made by people who thought that their money was going to help a cause they truly believe in. They thought they were helping the needy, not the greedy. To realize that your hard earned cash was not helping build schools in Haiti or food to flood victims in Pakistan, but going to pay for a car that you yourself could never afford does seem problematic.

But is it naive to believe that large charitable organizations, because they do good, ought to be run by poorly paid do-gooders? Often times, when it comes, for example, to policy matters, we have lobbyists on one side who are financed to the teeth by extremely well-off special interests and smaller groups of less well-financed people defending the needs of the less privileged or of the morally right. Three guesses who usually wins.

So, it does seem to be a utilitarian calculation. By paying big money to executives, are non-profits getting better people who will in turn raise even more money and be even more skilled at running organizations to both more efficiently provide help to those causes that need it and to more effectively advocate for change at the political level that will make the lot better for the most vulnerable? Sometimes you do get what you paid for. A money funnel does not solve problems, you do need folks with vision and organizational skill to put that money to its proper use and if you can get more out of the dollars donated by sending more than you'd like to one person's bank account, wouldn't the non-profit be well-served to do it. It would be an expensive, but prudent investment.

But, of course, that all hinges on a big IF. Do the high-paid executives really do the job better than there lesser compensated colleagues? Don't know, but that seems to be the point on which this discussion turns. We do lose a lot of good people from the non-profit sector because on many non-profit salaries, it's hard to raise a family and live comfortably. Should one have to give up personal security to live a life dedicated to a cause he or she believes in?

I wish I had a better answer, but I don't know where we would find the data to determine the effectiveness of our non-profit executives? We do have some regulars who work in the non-profit world (including Scott...and I'm looking at you too Ron). What is your sense?