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Local not-for-profit execs’ pay lags that of U.S. peers

October 17, 2015

Compensation for the highest-ranking officials at some of Indianapolis’ largest not-for-profits falls short of pay at many similar-size organizations throughout the country.

A new study by GuideStar, an online database tracking not-for-profits, calculated average salaries of the leaders of these operations nationwide. It found the average not-for-profit executive in Indiana earns less than the average leader nationwide.

And a review of about 35 of the largest not-for-profits in Indianapolis found that roughly half pay their leaders earning less than the national average as well.

Statewide, the gap appears to be growing.

The difference between Indiana’s and the country’s average pay for a CEO at a not-for-profit with a budget of $50 million or more was about 2 percent 10 years ago, according to data published by GuideStar. That gap has stretched to more than 17 percent now, according to the latest figures.

Nationwide, the average salary for leaders at not-for-profits with annual budgets of more than $50 million is about $690,000. The statewide average is less than $589,000.

The increasing disparity is also noticeable for organizations with annual budgets of $25 million to $50 million and for those with budgets of $10 million to $25 million. The difference between national salaries in those categories and the lower state salary was about 10 percent a decade ago but is more than 20 percent now.

Rooney Patrick Rooney

Patrick Rooney, associate dean for academic affairs and research with Indiana University’s Lilly Family School of Philanthropy, said the growth in the gap is likely due to the larger impact the Great Recession had on Indiana and the state’s slower recovery since then.

“This is disappointing, but not entirely surprising,” Rooney said, adding that Indiana’s wages and income are low relative to the nation overall.

According to data from the U.S. Census Bureau, Indiana ranked 13th lowest for median household income in 2014.

Rooney said the recession caused donations to not-for-profits to decrease more than 15 percent, and it wasn’t until last year that donation levels returned to where they were before the downturn started. With lower revenue, it’s possible not-for-profits didn’t award salary increases or they were smaller than might have been.

IBJ obtained information about individual group leader salaries from the not-for-profits' Form 990 tax filings and used numbers from the "reportable compensation" category. In some cases, leaders received additional compensation as well. (IBJ is working on an updated chart that will show total compensation.)

The biggest surprise to Rooney was the compensation for James McClelland, longtime CEO and president of Goodwill Industries of Central Indiana, who stepped down last year after leading an enormous expansion of the agency. McClelland earned $473,631 in 2012, which is close to state and national averages.

“You would expect him to be near the top of the country,” Rooney said.

However, some Hoosier not-for-profit leaders are beating the averages. For example, the CEOs for Indiana University Health, St. Vincent Health and Community Health Network all earn more than double the national average salary.

CEOs with the two largest Indianapolis-based not-for-profits—excluding hospitals and educational institutions—are on par with national averages.

Carl Dalstrom, the former CEO and president of USA Funds, earned $892,205 in 2012, which put him above both national and state averages. Also in 2012, Lilly Endowment Inc. Chairman N. Clay Robbins, who also holds the titles of CEO and president, took home more than $745,000.

One of the biggest gaps is with Gleaners Food Bank of Indiana Inc., which paid its president and CEO Cynthia Hubert about $156,867 in 2012—about 75 percent below the national average and 65 percent below the state average for similar-size groups.

Rooney said several factors play into a CEO’s compensation, including education, experience, performance and size of the not-for-profit.

“In general, the larger the organization, the higher the compensation at all job levels,” he said.

Philanthropy experts attributed the nationwide discrepancy to a lower cost of living in Indianapolis than in larger cities such as Chicago; Washington, D.C.; and New York.

Marissa Manlove, executive director of the Indiana Philanthropy Alliance, said she works almost solely with charitable foundations rather than the broader not-for-profit sector. She was surprised to see salaries of CEOs at local foundations were below the national average.

Manlove theorized that’s because Indiana has more community foundations than any other state and those organizations tend to be smaller and have smaller budgets.

“Maybe that’s part of what’s going on,” Manlove said. “Outside of that, I’m not really sure.”

Rooney said Hoosiers may simply be too modest when it comes to negotiating salaries.

“We’re just not as willing to pay or to ask for pay that moves the needle,” Rooney said. “That may be a good thing; that may be a bad thing.”

Experts acknowledged that some people argue not-for-profit leaders are overpaid, but they said organizations face the same problems the private sector faces. The boards have to attract talented and experienced individuals, and the larger the not-for-profit, the more responsibilities the leader will have.

“Certainly, there are a few nonprofits where the leaders are very handsomely compensated,” said Bryan Orander, president of Charitable Advisors. “But the majority … are fairly to grossly underpaid.”

Given the problems not-for-profits are trying to tackle, Rooney said, it’s in the community’s interest to hire the best and brightest individuals.

“We should pay good salaries to attract and retain good people when we get them,” Rooney said. “It’s probably a mistake to not pay them competitive salaries.”•

Editor's note: The original story and graphic included individual group leader salaries taken from the "reportable compensation" category of the not-for-profits' Form 990 tax filings. In some cases, leaders received additional compensation as well. IBJ has updated the story and the chart to reflect the total compensation.

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