We’re watching the Tournament of Roses Parade. They keep running commercials for the Shriner’s Hospitals, which are designed to make you cry and reach for your Visa card simultaneously.
Got us talking. How many cents on the dollar actually go TO the Shriner’s Hospitals? Turns out that at least on [, they’re unrated.
My credit card is remaining firmly in my RFID-shielded wallet.
Color me cynical, but I’m struggling to feel all gooshy-touchy-lovey-feely-supportive about charities with CEOs and CFOs who make a fuckton of salary.
So, what’s considered the sweet spot? .90 cents on the dollar? .80 cents on the dollar? What is considered to be a reasonable cost of running the business opposed to a scam?
I think you have to compare C-level salaries to other organizations the same size. I have no idea about Shriner’s, but if an organization has a $100M budget, it needs people at the helm who understand how to run an organization that size. A professional who has vision and enthusiasm will make a much more efficient use of the money they control than a well-meaning amateur who is willing to try for 50% of the market rate for that sort of position. For example, giving out lots of money to ineffective or hopeless or wasteful programs is not more virtuous than spending more money on vetting and making sure the money that does go out has a great impact. That’s not to mention the cost of going cheap on accounting or legal services, which really could cost you a fortune. I feel like that’s exactly the sort of thing that’s likely to happen with an ineffective CEO at the helm.
This isn’t to say that there aren’t “non-profits” that exist to funnel money to ridiculously high-paid employees. But that doesn’t mean that anyone working for a NGO ought to be making less than similar profit-centered positions.
The links in your OP are badly broken. So in your own words, what is your objection to Shriners Hospitals?
As for your question, imagine two charities that provide aid in the third world. One has a low amount spent on administration and sends virtually all the money to people in third-world countries. The other spends twenty percent or so on administrative expenses, including auditing local organization and hiring people to evaluate effectiveness of the programs it sponsors. Which is better? Simply looking at the amount spent on administration is perhaps overly simplistic.
I don’t know Shriners in specific, but reasonable costs are going to vary widely based on the type of organization and its size. In my experience as a nonprofit development professional, people vastly underestimate the cost of effectively running a nonprofit and impose rather arbitrary standards upon charities, including the expectation that we’re going to magically have highly qualified staff who are willing to work at 20% relative to what they’d earn in the commercial world. No, in order to employ highly skilled individuals, we must incentivize them to work in the nonprofit industry. This may be a business for a good cause, but it’s still a business. We have CFOs, accountants, marketers, and an entire team devoted to generating income. This is critical for sustaining programming over the long term. This is critical for maximizing impact on those we serve.
The OP’s link doesn’t go to a Snopes article, it goes to a blank Charity Navigator page, so I can’t tell what criteria is being used to determine that Shriners shouldn’t receive donations.
As a development wonk, my first step in evaluating the fiscal responsibility of a charity would be to look at their annual report and their audited financial statements, which should be posted on their website. I have to first get a sense of the nature of their programming and how much it costs to run. A hospital is probably going to spend a lot more money on one individual client than a food bank would spend on 300, because of the depth of the services being offered. Likewise, their staff expenses will be much greater, as will their overhead (business and administrative operations for running a hospital are likely staggeringly huge.) If you want to know the salary of their top 10 employees you can find it on their 990, in Guidestar.
But personally, I’m not offended by large salaries of executive staff in multi-million dollar nonprofits, any more than I am offended by large salaries in commercial CEOs (that is, if we have a problem, it is with society at large overvaluing that role, not the nonprofit industry.) It takes highly skilled individuals to run an organization of that size. I’m more concerned about the distribution of wealth within the organization itself. If your CEO makes $750,000 annually but your front-line staff are barely scraping by, I consider that corruption. If you’re cutting program expenses before you’re cutting large salaries, I consider that corruption. I have seen execs at other nonprofits cut program costs or fire staff in order to give themselves a raise and that disgusts me.
On a personal note, my work itself is not an act of charity, it is my career. I had to pay a fuckton of money to get a graduate degree that qualifies me to do it and it is completely reasonable to expect that I will get a return on my investment like any other professional would. If I had to endure the constant exhausting work of your average national-level charity CEO, I would expect to be compensated appropriately. ‘‘Appropriately’’ as assessed by the industry itself, not people outside of it. Most people don’t want to think about how the sausage is made, or the concrete financial considerations of any nonprofit. They don’t want to think of it like a business. Hell, I’ve got frontline staff who don’t want to think of it like a business. And that’s fine, they don’t have to. But I do. My job is to think of it like a business.
It’s not anywhere near as heartless at it sounds - we can’t help people without excellent, sustainable programming, and we can’t have that without qualified executive staff. The quality and skill level of staff can make or break a nonprofit.
I’m of the opinion that if an organization can afford to pay a CEO more than half a million dollars a year, they clearly don’t need one cent from me. Yes, grossly excessive executive salaries are a problem in general, not just a nonprofit problem, but helping some rich bastard buy another summer home or a new Jaguar in the name of ‘charity’ is simply abhorrent to me. Let them get donations from fellow rich people instead of asking for middle- or lower-class to fund their opulence. I don’t know how to solve this problem in a broad, long-term sense but in the near-term, personal sense it’s easy enough to just give to local organizations instead.
I read your entire post very carefully ! Thank you for that. I only quoted the above portion because I did indeed NOT click on my own link. It was a comprehensive list of all Shriner’s Hospitals, from the Charity Navigator page. Cannot imagine why it was blank.
I don’t think people should work for no pay ! I think that if I’m giving to a charity, it should be charitable in its operations and goals.
It’s not only a question of percentages, it’s also cash flow. Imagine a charity can run a week-long event, say a raffle. One choice has $500,000 in costs (advertising, prizes, administration, etc.) and nets $100,000 for the charity. The other costs $10,000 and nets $9,000.
Clearly, by percentages the second choice is best (90% vs. 20%) but the first choice puts more money in the charity’s coffers. Personally I pay more attention to what the charity spends its proceeds on (not all of them are doing what you might think from the name) and then how much actually goes there.
“Activist and fundraiser Dan Pallotta calls out the double standard that drives our broken relationship to charities. Too many nonprofits, he says, are rewarded for how little they spend – not for what they get done. Instead of equating frugality with morality, he asks us to start rewarding charities for their big goals and big accomplishments (even if that comes with big expenses). In this bold talk, he says: Let’s change the way we think about changing the world.”
His argument is that we shouldn’t focus on overhead percentages, instead we should focus on results.
Is it better that a charity has a 10% overhead rate, and only produces $100,000? Or that a charity has a 50% overhead rate and produces $100,000,000?
However, you have to take into account opportunity costs for the employees of the former charity. 80% is extremely high overhead so it could probably be shrunk a little. Those employees who were let go, if they are still dedicated to the cause, could find a higher paying job outside of charity and then have money left over to donate to the cause (even though in real life it doesn’t work out that way usually.)
And there’s nothing wrong with giving local. There are plenty of smaller, local orgs where the top salaries are liveable but reasonable, and honestly, while I’m not going to throw national organizations under the bus, there are a lot of social issues better handled within the community. The best organizations (in my opinion) are community-driven. To use my org as an example, domestic violence isn’t going to look exactly the same in Metro Detroit as it looks in Salt Lake City, Utah. Different populations will have different needs and local organizations will be best equipped to meet those needs.
I don’t know a lot about national-level nonprofits or how they differ structurally from mid-level of the sort I work at. But a CEO’s job is in large part to get to know people who will donate large quantities of money. So I think of it this way: if a person is paid $100,000 a year and generates $500,000 in donation revenue, that’s all well and fine for an organization with moderate needs. But at these enormous nonprofits, it’s more like this $1,000,000 salary is generating 500 million in revenue. (I'm making up these figures for illustrative purposes, I've no idea what the average is.) When the charity pays the extra to the CEO, they are greatly maximizing their revenue, thus increasing the money they will have to spend on programming. This is the part I think a lot of people are missing: they would not be able to serve nearly as many people if they were paying the CEO less money. Filthy rich people know other filthy rich people and are more likely to bring in revenue. That’s also part of the function of a board of directors.
This is why these expectations for national-level orgs feel unrealistic to me. The only real way, I think, to independently evaluate the fiscal ethics of an organization is to compare it to others of its type and size. There’s only one national-level organization I regularly donate to, and that is the ACLU. I’ll admit I’ve never really checked out its fiscals because the odds that an organization grows to that size by mismanaging its funds seem vanishingly small to me. Is that naive? Maybe. But I’m not an expert on organizations of this size and know very little about how they operate. I can only extrapolate based on my experience at smaller organizations.
My job consists mainly of generating corporate and foundation revenue that goes directly to programming in an organization with a $4m operating budget. I’ve worked at orgs ranging in size from $300k to $12m but nothing larger. I’m not at liberty to say what our CEO makes but I doubt anyone would find it outrageous. For me, personally, I feel better about keeping my work, and my money local. This is in part because I’m a total programming nerd… if I ever had a huge donation to make I’d want to see it create something new and concrete and be as much a part of that development process as anyone would let me. I donate a lot to my current org, and when I do, I earmark the funds for the stuff we’re having trouble funding.
I agree with your overall point, but I also agree with Ludovic, 80% is extremely high overhead. To me, that points to mismanagement of funds. I’d have to ask our events manager what our standard overhead is but I’d place bets it’s nowhere near that high.
Yeah, it makes perfect sense for the organization to do, even if it costs them the possibility of my relatively small donation. But it also makes no sense for me to donate to the organization when some of that donation is going towards the filthy rich CEO’s latest vacation home; like I said he can use his connection with other filthy rich people to bring in more money, and leave me entirely out of it. For me it’s just a smaller scale version of giving money to a religious scam artist like Joel Osteen, who’s going to use charity as justification (and send some there), but is actually going to spend some portion of the money on adding a golden toilet to his latest vacation home.
I don’t give to the United Way for a number of reasons, one being the whole CEO pay thing, the other because I’ve been unduly pressured to give to them at past places of employment and as a result, they’ll never get another penny of my money. Their 20% off the top overhead is another big one. Giving them $5 to have $4 reach other charities, which have their own overhead, seems rather inefficient. However, if you don’t have the time or interest in tracking individual charities, I won’t begrudge you giving it to these folks.
Another entire field to look very closely at using the above sites are any ‘wounded warrior’ type charities. There are a couple that are pure scam and you should never give them your money.
Also remember that when they say ‘fundraising’, they’re talking about expenses in raising more money, including mail-outs. This money is NOT going to help people.
When they say “raising awareness”, this is code for an ad campaign and giving out stupid doo-dads. It isn’t giving money to help people either, it is just spending money to get your name out there and hope for more donations. This is important, because some places like Susan Komen spend far too much money on “awareness” without actually benefiting their supposed cause.
You seem to have a strong reaction against a person achieving financial success, as if that fact is in and of itself suspect or wrong? I’m afraid this attitude befogs your thinking.
I would suggest that the success of a charity executive could be an indicator of the charities success - similar to a corporate executive whose pay is tied to the companies success.
Why does it bother you that CEO 1 who produces $100,000,000 earns $2,000,000 (2%), while it is more acceptable that CEO 2 earns $100,000 for producing only $1,000,000 (10%)?
Did you actually read what I posted? I have a strong reaction to someone asking me to give them money in the name of charity, when in actuality they’re using the “charity” money to maintain an extravagant lifestyle. Asking me to donate my money to a fund that is, in part, used to pay an exorbitant salary to someone who’s going to use it to pick up another jag or furnish their latest vacation home, when I don’t make enough money in the first place to buy high-end cars and estates in the first place is what bothers me.
I also think that the entire system of boards of directors voting each other huge executive salaries is a gigantic, incestuous scam, but that’s irrelevant to this thread or my prior comments on this thread and I’m not going to discuss it here.
Are there large companies that actually do this? As far as I know, they all do the ‘golden parachute’ setup, where the execs gets paid bucketloads of money regardless of how well the company actually does, and get paid even more when they leave, even if they’re forced out. The execs may get additional money if the company does better, but setups where they end up not getting paid hugs sums of money if they screw up the company appear to be vanishingly rare, and I’d only consider their pay ‘tied to the company’s success’ if they stand to get nothing (or even have to pay) if the company fails under their leadership.
There’s no such thing as a single person who legitimately produces $100,000,000, so your question is nonsensical. There’s a lot more than one person involved in any venture involving that vast of an amount of wealth, and giving one person sole credit for it is absurd.
But there are things that take a real specialist to run. Think about something like the Red Cross, or Doctor’s Without Borders, or Kiva International or something. What does it take to not only keep a place like that humming along, but to be able to have vision to keep moving in ways that keep it relevant and growing? I’ve never in my whole life met anyone with the ability to run something like that–I mean, I know plenty of doctors and lawyers and engineers–people who make good money by any stretch of the imagination. And none of them would be up to that sort of challenge: they wouldn’t know where to start. Their just can’t be that many people who can do that sort of thing, and they would all be turning down opportunities to make a lot more money.
As someone who works on a development team, I would encourage you to think this through. Spending a fraction of revenue on activities required to generate a significant increase in revenue results in more programming dollars and more people served. It is a pretty fundamental part of the structure of nonprofits. Every nonprofit I have ever worked at has relied upon mailings to generate income. Money spent on fundraising activities is absolutely going to help people. Heck, I’d argue that money spent on fundraising activities has the highest impact out of any dollars spent. You can pay $20 for one meal for a homeless person (what people typically want out of their charity dollars - directly to the people!) or you can pay $20 for the cost of printing and envelopes to send mail to 20 rich people who donate $100 each which results in $2000 to spend on meals for the homeless. Money spent on ‘‘fundraising’’ in that example is higher impact than money going directly to programming.
I guess "I just spent $20 for envelopes to send to rich people’’ doesn’t give the warm fuzzies as much as buying a homeless person a meal, but considering the former activities allow the nonprofit to buy 100 homeless people a meal, it’s actually the thing that makes the biggest difference for individuals in need.
This is somewhat of a tangent but at Penn I had friends who worked at the Center for High Impact Philanthropy which really is about researching the question “How can we maximize the value of money donated to charity?” People with endowments or large dollars to invest could go there for consults. I think it’s a great idea, in part because people really don’t get how nonprofit fundraising works, and frequently what the donor thinks is the best use of funds is at odds with what would actually be the best use of funds. Donors have big, romantic ideas about how these dollars are, or ought to be spent, and in my experience (9 years working in development at mid-range nonprofits) these ideas are based more on a fantasy of helping than addressing the pragmatic, unsexy problems faced by every charity organization.
In all fairness, even nonprofits themselves are kind of dumb about this. When revenue is tight, one of the first staff positions to be cut is development (fundraising and grant writing.) This is unfathomably stupid. We keep the lights on.
Like Spice Weasel, I have a lot of experience in development and fundraising. It was my advanced degree, and my chosen profession for a decade. I don’t have much to add to his (her?) words, they’re spot on and insightful.
I don’t have any issues with your stance here either. People should donate locally to organizations that they can build a relationship with. Doctors Without Borders does exceptional work, and the world would be worse off without it. Their CEO earns and deserves every penny he makes. But unless you’re pouring in hundreds of thousands of dollars (millions?), your donation isn’t going to be impactful, and you’re certainly not going to be on a first names basis with Jason Cone.
Donate to organizations that you have or can have a relationship with. As a volunteer, as a board member, as a resource, as a voice of community support, as a services client or provider, etc. You will benefit from that donation 10x more than you would by sending it to the biggest, most efficient (most faceless) non-profit out there. When they call to thank you, have a conversation with them. If they don’t call to thank you, call them, and tell them why you donated, and why you won’t be donating in the future (if you’re miffed by getting snubbed).
