Study Finds Big Pay for Leaders of Foundations

The heads of the nation’s largest philanthropic foundations saw their salaries increase five times the rate of inflation last year, to an average of $363,000 a year, Internal Revenue Service records show. The figure places the chief executives of these influential national charities in the highest 1% of U.S. wage earners.

Six years after the United Way scandal drew public attention to the issue of philanthropic spending, the national controversy that erupted concerning William Aramony’s $463,000 annual compensation package seems to have had little direct impact on how much the charitable world pays itself.

Thomas M. Lofton, who heads the $12.7-billion Lilly Endowment, is paid $450,000 plus $163,648 in benefits for overseeing the nation’s largest foundation, which concentrates mostly on charitable works and civic philanthropy in Indiana.

Ford Foundation President Susan V. Berresford makes $440,500 plus $169,705 in benefits. With offices around the globe, the foundation she heads devotes the largest share of its grants to international peace and social justice.

To be sure, the paychecks of nonprofit executives vary widely. Directors of soup kitchens or homeless shelters often are paid salaries similar to the $26,000 a year that the typical American worker makes.

But while the salaries of the top foundation executives exceed those of other nonprofit heads, the practices of these large charitable agencies are important far beyond their own bottom lines. They establish the gold standard for executive compensation that smaller charities envy and emulate. Their system of evaluating performance is closely watched, and eventually, the top salaries raise the bar for everyone.

Rep. Robert Menendez (D-N.J.) has twice introduced legislation to cap the salaries of nonprofit executives at no more than the salaries of U.S. Cabinet secretaries, currently $151,800. His latest measure has not attracted a single co-sponsor.

From the foundations’ perspective, officials say the salaries they pay are a reflection of the marketplace and necessary if nonprofits are to successfully vie for talent.

“We have to compete to get qualified people,” said Colburn S. Wilbur, who gets $272,549 as executive director of the third-largest foundation in the nation, the $9-billion David and Lucile Packard Foundation in California’s Silicon Valley.

Foundation executives also say that, relative to private corporations, their salaries are hardly excessive. Indeed, the average chief executive officer of 250 of the nation’s largest corporations, surveyed by compensation specialist Graef Crystal, was paid $2.1 million last year, up 12.3% from the previous year.

Congress requires only that foundations pay “necessary and reasonable” salaries, a rule that has launched an industry of consultants who determine what similar people are paid for similar work in similar circumstances.

The United Way of America, only recently recovered from the Aramony scandal, gave its new director, Betty Stanley Beene, a 41% pay increase over her predecessor. Still, it was $15,000 a year less than she had been getting for operating the local United Way chapter that oversees the New York, New Jersey and Connecticut area. Now, she makes $275,000.