We zeroed in on 1,698 nonprofits located in New York to see if their CEO pay changed after new regulations took effect in 2013. Since then, New York has prohibited nonprofit officers from being present at meetings where their pay is being discussed.
We found that compensation was an average of 2% to 3% lower than expected by comparing pay for nonprofit CEOs in New York with pay in other states. We also compared the change in CEO pay with compensation changes for other executives’ pay at the same nonprofits – since they weren’t affected by this legislation.
We also found that many nonprofits changed how they handled executive compensation. That is, they were more likely to set up compensation committees, perform an independent compensation review, or adjust pay to be in line with similar organizations. Nonprofit CEO bonuses also became more correlated with the growth of an organization’s budget – a strong indicator of overall performance.
And we found that, despite earning less than they might have expected, nonprofit CEOs spent about 2% more time working – without any additional turnover.
Interestingly, we also determined that by some measures, the nonprofits became better-run after the legislation took effect. For example, 2% more people chose to volunteer, and funding from donations and grants grew by 4%.
Nonprofit CEOs make considerably less money than corporate CEOs and have experienced a slower wage growth over the last decade. Based on our estimates, corporate executives saw their annual pay grow by 54% from 2009 to 2017 to an average value of US$3.2 million, while nonprofit executives experienced a 15% increase in pay, reaching an average value of $396,000 in 2017 – the most recent year for which we obtained IRS data.
Nevertheless, because most nonprofits are exempt from income tax and many accept donations, it’s only natural that the government and funders would not want to waste their money on excessive compensation. For example, food bank donors might prefer to see nonprofits spend more of their dollars on feeding the hungry as opposed to perks and big pay packages.
One possible reason why nonprofit CEO pay is growing much more slowly than for-profit CEO compensation is that nonprofit leaders are committed to specific causes and have more motives aside from money to excel at their work than their corporate counterparts. Other possibilities could be that nonprofits face pressure from donors to avoid high executive pay or that nonprofit CEOs have little leverage.
We hope that our future research will answer this question.
A former top executive at the Bill & Melinda Gates Foundation has said that staff are “freaking out” about the nonprofit’s future, according to a report in the Financial Times.
“I think people are freaking out a little bit,” the unnamed former insider told the newspaper. “People are really worried that the credibility and standing of the foundation is in jeopardy now, especially in areas like gender empowerment.”
The Financial Times on Sunday reported hearing “murmurs of dissent and doubts” about the organization’s future.
Insider has reached out to the foundation for comment.
On Wednesday, the foundation announced that it would add trustees, saying those new voices would help drive its “strategic direction.” Bill Gates and Melinda French Gates also committed another $15 billion to the foundation.
“These new resources and the evolution of the foundation’s governance will sustain this ambitious mission and vital work for years to come,” Gates said Wednesday.
French Gates said: “I believe deeply in the foundation’s mission and remain fully committed as co-chair to its work.”
However, the release also signaled a shaky bond at the foundation’s highest level, with Gates and French Gates agreeing to only a two-year committement as co-chairs.
The press statement said the decision for both to remain was to “ensure the continuity of the foundation’s work.”
But, it said that “if after two years either decides they cannot continue to work together as co-chairs, French Gates will resign her position as co-chair and trustee.”
RIoT is a nonprofit organization driving innovation and entrepreneurship in the Raleigh area.
One program, RIoT Your Reality, is a competition where teams pitch AR ideas to improve the city.
Other initiatives include an accelerator program and a data-centric stormwater management project.
This article is part of a series focused on American cities building a better tomorrow called “Advancing Cities.”
In July, six teams will demonstrate their ideas for how augmented reality can help solve some of the challenges facing Raleigh, North Carolina, and the surrounding areas.
Through the program RIoT Your Reality, the teams are examining ways to improve diversity, inclusion, and accessibility in city programs, promote workforce development, and reinvent the Raleigh Convention Center to drive economic development.
“It’s the intersection with government,” Tom Snyder, executive director at RIoT, a local nonprofit working to advance innovation, told Insider. “The city of Raleigh and town of Cary together posed a few problem statements that they’re looking for help on. And we’re running a challenge where people are developing new prototypes of augmented-reality applications to serve those challenges.”
RIoT Your Reality is a partnership with RIoT, the city of Raleigh, the town of Cary, Google Fiber, US Ignite, and Facebook Reality Labs. It kicked off in April with several teams pitching their AR ideas. Six were selected to receive $1,000 to build a prototype, which they’ll demo during an event on July 27. A final winner receives $40,000 and a spot in the RIoT Accelerator Program to launch a new startup.
Snyder said the goal is to create a municipal pilot project and learn how to scale a startup to assist cities beyond North Carolina.
The AR competition is just one of the ways that RIoT works to drive innovation and entrepreneurship in the Raleigh area. Here’s a look at some of the organization’s other major programs.
Helping businesses create new tech jobs
RIoT was founded in 2014 as part of the larger nonprofit Wireless Research Center, located in Wake Forest, North Carolina, which works to advance wireless technology innovation.
Originally, the name was an acronym for Raleigh Internet of Things, then Regional Internet of Things. Now it just goes by RIoT.
“Our grounding thesis is that the best new jobs are created at the forefront of emerging technology,” Snyder, who helped found the organization, said. RIoT’s programs help entrepreneurs start companies and established businesses grow through new technology adoption, all of which creates new jobs.
Being headquartered in Raleigh offers advantages, Snyder said. The area is home to several top universities, including Duke University, the University of North Carolina at Chapel Hill, and North Carolina State University, which fosters a talent pipeline. Several major tech and data companies, including IBM and SAS, have a presence in the region, creating a “great diversity of industry” within the tech sector, he said.
“There are just massive industries and a really nice balance here that makes it a more attractive place for people to be,” Snyder said. “You can’t just job hop during your career, but you can industry hop successfully. And that brings fresh ideas and really makes us a strong place to live.”
RIoT has another location in Wilson, North Carolina, though its presence extends beyond the state. The organization hosts events around the country and is planning to establish new offices in Colorado and Virginia.
Enabling startups to get off the ground
One of RIoT’s programs to boost economic development, the RIoT Accelerator Program, connects entrepreneurs with partners in their industries and gives them access to prototyping tools and other resources.
The accelerator is currently on its eighth cohort. Snyder said RIoT is purposeful in supporting underrepresented groups when selecting startups to participate, and about 60% of the companies involved have been run by women, minorities, and veterans.
Since 2014, the companies participating in the accelerator have created more than 200 jobs, generated more than $100 million in revenue, and earned millions in grant and venture funding, he said.
Growing the accelerator to help more startups is one of its goals. By the end of 2021, Snyder said the accelerator will be offered in multiple cities.
To help startups prototype and experiment with ideas without having to spend money on equipment, RIoT Labs offers hardware, wireless, and software prototyping tools, including a 3D printer, electronic equipment, soldering irons, and more.
“We can provide that equipment for you to go create your new connected device, do the performance testing on the front end, do the regulatory certification testing on the back end, and get it to market,” he said.
RIoT works with government and corporate partners, including Cisco and SAS. Snyder said the organization is always on the lookout for new ones willing to support the entrepreneurial community.
“We want Raleigh to be the place that anyone in the world who wants to participate knows if I come here, I can find the partners that I need to be successful,” he said.
Making Raleigh the center of the ‘data economy’
RIoT worked with Raleigh and the surrounding communities on a data-centric stormwater management project.
Partnering with local startup GreenStream Technologies, they used water-level monitoring sensors to better understand water movement and predict when to shut down a street before it floods or dispatch emergency responders before flooding reaches emergency levels.
Snyder said Raleigh has done a good job of thinking about how to make data collected at the city level accessible – and has the potential to be the “center of excellence of the data economy.” Processing and measuring data depends on the advancement of artificial intelligence, augmented reality, and automation technologies.
“We’re moving from a world where the economy was driven by the internet to now one where it’s being driven by real-time data,” he said.
Through programs like RIoT Your Reality and the water management project, Raleigh serves as a testbed to experiment with new ideas and technologies.
“When we can do that successfully, not only are we solving the city’s needs in a way that they can remain focused on their day-to-day operations, but if it’s a local company that provides for those needs, we’re creating jobs here in the community,” Snyder said.
If 2020 has made anything clear, it’s that billionaires aren’t going to save us — and that goes for all the millions they spend on philanthropy.
Philanthropy is currently dominated by high-net-worth individuals, and philanthropy was already serving an outsized role in American life even before the inconsistent government response to the pandemic.
Anand Giridharadas, the author whose book “Winners Take All” criticizes this overreliance, told Business Insider that instead of funneling money into causes they’re passionate about, billionaires should instead be taking less from workers.
The reliance on high-net-worth individuals for philanthropy also leaves a gap that the government needs to step in and fill.
There’s an apt metaphor for the rhetoric of “billionaires will save us” in beloved children’s cartoon “Finding Nemo.”
Our protagonists – both fish – come across sharks who paradoxically claim to be vegetarian. The sharks, to their credit, seem pretty nice. They’re trying to reform, and don’t want the fish to be scared of them. Their refrain? “Fish are friends, not food.”
They seem to be holding strong until Dory gets a nosebleed. There’s literally blood in the water; primordial instincts win out, and the sharks attack. The fish were right to be scared.
“We don’t need them to make a difference. We need them to stop making a killing at the society’s expense. We don’t need them to increase their generosity. We need them to reduce their complicity and injustice.”
Giving is still dominated by high-net-worth individuals
This week, nonprofit organizations and foundations observed Giving Tuesday. It’s a day that a grassroots movement has been increasingly successful in connecting to charitable giving after the consumer blitzes of Black Friday and Cyber Monday.
Giridharadas said there’s an important distinction between everyday Americans donating to causes they support and the ultrawealthy pouring huge donations into various causes. Someone donating $100 to a beloved cause is, as Giridharadas notes, “for the good” and worthy of celebration.
But ultrawealthy philanthropy is a different beast entirely, he said, because it’s “engaging in giving at a scale that is quasi-governmental in ways that often seek to erase and obscure” the ultrawealthy’s role in causing many of the social problems that they laterally become interested in solving.
Even though “Winners Take All” was published in 2018, it remains a hot-button publication, and still comes up in interviews with billionaires. In December 2020, one such billionaire, former Google CEO Eric Schmidt, was asked by TIME magazine to comment on the book.
Schmidt said he hasn’t read the book, that it has been described to him, and that he thinks there’s plenty of examples to both prove and disprove its thesis. Schmidt also said that Giridharadas’ main argument, that billionaires use philanthropy to alleviate social pressure while shaping change in a way to benefit themselves, “is certainly not my goal.”
A notable Democratic donor, with close ties to the Obama White House, Schmidt acknowledged that “the American Dream is in trouble,” as the average person hasn’t been doing much better over the last decade, while “the elite, obviously including myself, have done super well.”
A representative for Schmidt declined to comment to Business Insider.
A U-shaped philanthropy curve
Research has shown there’s a “U” shape of giving, with lower-income people – particularly those making under $30,000 a year – and higher-income people giving the most.
Jacob Harold is the executive vice president of Candid, a nonprofit that helps connect people with information and data on giving. He said when looking at the numbers of how much people are giving, it’s important to recognize the distinction between giving as a percentage of income or as a percentage of wealth.
“You have folks at the lower end of the spectrum who really don’t have a lot of wealth,” Harold said. “And you also have people at the upper end of the spectrum, who are giving a lot as a percentage of their income, but actually aren’t touching their wealth, and so from that perspective are actually being less generous.”
Dianne Chipps Bailey, managing director, National Philanthropic Strategy Executive at Bank of America, said the gap is “huge,” but grassroots initiatives like Giving Tuesday can help bridge it.
Among Bailey’s clients, she said she’s seen a “significant increase in interest” in giving “to achieve racial equity.” Her team has created a four-part starting plan for impactful giving towards racial equity.
Jacqui Valouch, head of philanthropy at Deutsche Bank Wealth Management, works with high-net-worth and ultra-high-net-worth individuals. She told Business Insider that giving came to a halt in March, but was boosted “enormously” in the second half of the year.
Some high-net-worth individuals are calling for stricter regulations on that giving
A subset of potential megadonors have even started to call for their own power to be curtailed.
Scott Wallace is the co-chair of the Wallace Global Fund, a member of the Patriotic Millionaires. This group of self-described “proud traitors to their class” wants all Americans to hold the same power as millionaires – and for its own taxes to be raised.
Wallace, who ran for Congress in 2018, told Business Insider, “if I have a choice between annoying some of the wealthiest dynasties in America by making them spend more” and “helping the people in my district be served by nonprofits,” the decision is “a total no-brainer.”
Another reform? Deductions for donor-advised funds (DAFs). Currently, someone can put assets into a DAF and deduct that full amount from their taxes immediately; all of that money is earmarked for nonprofit causes, but it could sit there for a while.
Under a related reform proposed by Wallace, DAF users would only get their tax breaks once the money leaves their account, instead of when it enters. Per Wallace, the reforms could unlock $200 billion for nonprofits – which could certainly need it this year.
But while reforms in giving could help, ultimately the government – and not billionaires – can provide the relief we need
Even if billionaires are donating meaningfully, they’re still individuals with their own interests.
Most importantly, they’re also not a replacement for the government – and that’s only become clearer with the lack of structural support in fighting coronavirus and racial inequities. A nonprofit can’t singlehandedly fend off the devastating effects of a global pandemic.
“We only will succeed with deep government involvement,” Harold said. “Even though it sounds like billionaires have a lot of money, in some ways it’s quite small compared to the trillions that the US government is able to bring to bear.”
That’s not to say there isn’t a role for billionaires. Rather than giving toward individual causes, or putting black squares on Instagram in support of racial equity, Giridharadas said they can fund programs that would benefit not just Black people, but all people – if they pay “proper taxes.”
“Are any of the wealthiest and most powerful people in our society serious about bending the arc toward justice?” Giridharadas asked. “And if so, are they willing to do the only thing that is actually going to get us there, which is fighting for the kind of systemic change that would reduce their own power?”
“And the good news is if they don’t want to do that, that’s fine. That’s sort of what I expect,” he said. “The rest of us have a way to do that – which is called democracy.”
[Editor’s note: The fifth paragraph was amended after publication to clarify that billionaires’ net worths grew by nearly $1 trillion amid the pandemic, per a report by the Institute for Policy Studies.]