(or 5 reasons why you should care that Jeffrey Raikes doesn’t make 7 figures)
The debate over nonprofit CEO compensation seems a never-ending issue that has professionals weighing in on both sides of the argument. Some say that higher salaries promote and attract better leadership, while others argue that lower wages are appropriate as they allow more money to go back into the organization.
The unwavering example of a CEO with excessive compensation seems to be Jeffrey S. Raikes of the Bill and Melinda Gates Foundation who makes an annual salary of $990,000. Perhaps Raikes is the excessive-pay go-to example because he’s already sitting on a fortune from his past position as the president of the Business Software Division at Microsoft. Or perhaps it’s because the former CEO of the Bill and Melinda Gates Foundation, Patricia Q. Stonesifer, didn’t have a paycheck at all (and now serves as the Chairwoman of the Smithsonian Institution for no pay). Whatever the reason, I’d like to present– for argument’s sake– five reasons why nonprofit leaders should care that Jeffery Raikes is not making seven figures.
1. The Gates Foundation has given away more money than the annual GDP of the entire country of Jordan– and their CEO makes less than Heidi Montag from The Hills.
The Gates Foundation gives out 3 billion dollars a year, and has made 21.08 billion dollars in grant commitments since its inception in 1994. Just one of their programs– The Global Alliance for Vaccinations and Immunizations— has saved over three million lives since 2000. The foundation has an undeniable impact and it’s called the largest transparently operated private foundation in the world. But it has to give large sums of money; charitable foundations are required to give away at least 5% of their assets each year in order to maintain tax exemption. This amounts to an annual giving of 1.5 billion US dollars each year from the Bill and Melinda Gates Foundation, which sits on 34.17 billion dollars in asset trust endowment. In other words, the foundation gives away the entire annual GDP of Belize each year in an effort to improve global health. And just think, the gentleman in charge of all of this (after Bill and Melinda Gates, of course) makes $10,000 less each year than the average joe can win on a game show.
2. Jeffrey Raikes is a personal philanthropist.
Though Jeffrey Raikes is making $990,000 each year, he’s giving a good portion of it back to the community. He has started his own foundation (with over 113 million dollars in assets) that provides support to teens and adolescents. He is a trustee at the University of Nebraska Foundation, and he is the designer of the University of Nebraska- Lincoln Jeffery S. Raikes School of Computer Science and Management. And when I looked up Heidi Montag and philanthropy, I discovered that she once served food at a Rescue Mission. This is honorable and certainly a contribution to society, but much different in scope and scale than Raikes efforts. In short, not all folks making more an a million dollars each year give back in the same way, and Raikes uses his six-figure salary to give back in a meaningful way even though he doesn’t have to because his job is already about making a difference. It seems that, to Jeffrey Raikes, philanthropy is more than a job; it’s a way of life.
3. Raikes isn’t the highest paid nonprofit CEO (In fact, some are paid double his salary)
According to Charity Navigator’s 2009 Compensation Study, that title belongs to the President of the University of Delaware who earns 2.37 million dollars per year, followed by the president of the Salk Institute for Biological Studies who makes 2.03 million dollars per year. In fact, CEOs in education, health, human services, and arts & culture make more money than CEOs in public benefit nonprofits such as foundations, according to Charity Navigator. This information is important because it means that Raikes does not represent a symbolic ceiling on nonprofit CEO salary. Folks in the private sector can make billions of dollars and the sky is the limit, but the most that a professional in the nonprofit sector can make is 2.37 million. Don’t get me wrong, that’s a massive chunk of change– and most nonprofit professionals don’t enter the sector because they think that is where they’ll make the most income– but the fact that there is a ceiling is hardly a good reason to keep an effective leader earning under seven figures.
4. Culture says: orchestrating a touchdown pass > saving millions from disease (x 4).
I don’t mean to pick on my new Trojan family, but Pete Carroll, the head football coach at the University of Southern California (a private nonprofit) makes 4.4 million dollars each year (which means I’d have to be enrolled in my grad program for 110 years in order for my tuition to pay for one year of Coach Carroll’s salary). He is also making two million dollars more per year than any nonprofit CEO in the nation. In fact, his salary is four times larger than that of Jeffrey S. Raikes. There’s a cultural argument to be made here: football has its own set of rules in terms of what is considered competitive payment (need I remind readers of the recent buyout of Notre Dame’s Charlie Weis? Check out a bit of this letter from Notre Dame Professor, John O’Callaghan, for a peek at what this nonprofit-minded educator thinks of the buyout). Though this perspective has some cultural arguments against it, I think we should look at Raiker’s salary with this kind of information in mind.
5. Talent costs money (but if it doesn’t, then let’s not make CEO positions exclusive to those with private means).
“Talent costs money” is a popular warrant in business articles all over the internet, in all different sectors it seems. But Felix Salmon, in his article on the CEO’s salary, doubts that there’s a correlation between payment and talent, and thinks this is a silly excuse in the argument to pay Raikes seven figures. To pay nonprofit CEOs little money because of their sector (and the effort to preserve funding for programs) is one thing, but I think the folks at Philanthrocapitalism make a good point when they argue that being a CEO for a nonprofit should not be exclusive to those with private means. As lines between public, nonprofit, and private sectors become blurry, CEO payment may start to change. In the meantime, let’s look at the broader picture before we get too upset about the salary of the CEO of the Gates Foundation. There are greater battles to be fought, and the $990,000 salary that many folks see as a travesty could also be seen as rightful, hard-earned, and important in the evolution of nonprofits as a whole.