Jay Gause (jaygause@HOTMAIL.COM)
Wed, 23 Sep 1998 06:13:49 PDT
MPAs (Masters of Public Administration) types struggle with this
executive compensation question for nonprofit and governmental entities.
One of the gauges used to compare salary appropriateness for both profit
and nonprofit organizations internationally is the difference between
top executives' pay and the average line level employees' pay. The
implication is the wider the gap the more questionable the executives'
In Japan for instance, the gap between executive pay and line level
employee pay is small. I can't remember the multiplier but let's guess
it's 20. That would mean if the average line level employee earns 30,000
the level of top executive salaries would be in the 600,000 range.
In Western Europe it's slightly more askew with a multiplier of maybe 30
In the USA it doesn't make any sense at all, perhaps a multiplier of 40
(30,000/1.2mil). Now MPAs and MBAs must ask themselves, is the CEO
really worth 40 times as much as a line level employee worth keeping in
the organization? This is a hard question the perplexes those who study
the US economy. Is it corporate greed? Does it extend to nonprofits as
To put the BSA in perspective though, if the average BSA line level
college grad employee makes 26,000 (and I hope he does since college is
required)then a multiplier of 20 (Japan for profit style) would equal a
total compensation package of 520,000. Seems very fair for a for-profit
org. Is it appropriate for a nonprofit?
One final note. Nonprofits are competing for charity dollars and charity
grants. They are heavily scrutinized as to overhead administrative
costs, especially executive salaries. To win public confidence that they
are a worthy charitable cause requires the top leaders to model that the
ideals of the organization are worth sacrifice (i.e., charitable
contribution). If the public gets another message from Ratcliff's or
others salaries, we're in trouble!
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Terry Howerton Sakima Group, Inc. SCOUTER Magazine Kansas City