CEOs lowly paid in Not For Profit sector – up to 30% less

Strategic Pay Ltd – Media release

August 28, 2013

CEOs lowly paid in Not For Profit sector – up to 30% less

Chief executives in the not-for-profit sector are likely to be paid up to 30% less than their counterparts in the private sector, according to research carried out by remuneration and performance management specialists Strategic Pay Ltd.

The study entitled “Passion and Purpose” showed that CEOs in the Not For Profit sector were more about “making a difference” rather than financial reward, hence the difference with both the private sector and the public sector where income was up to 10% lower on average.

Strategic Pay Chief Executive, John McGill, said that the drivers in the not-for-profit sector were fundamentally different than other sectors in the economy, with the private sector being profit driven to satisfy the needs of shareholders while the public sector has a tax base and a portfolio of assets to support its requirement to use taxpayers’ money effectively to satisfy the collective needs of the citizens.

The report said that CEOs in the not-for-profit sector are strongly driven by intrinsic rewards.

“They work to make a difference and use their experiences and knowledge to contribute to a meaningful purpose. This motivation is an integral part of what drives their work and it provides rewards.

“The importance of personal commitment to the goals of the organisations they work for was very forcibly conveyed in virtually every interview undertaken in the survey and dominated the view they had of their roles.

“They agree that their work is satisfying and they know where their efforts go and that they do make a difference. They also like the fact that they work with like-minded people who really do care, are enthusiastic and tend to be less cynical.”

McGill said that New Zealand has a philosophy of “fair pay for fair work” for all sectors except for Not-for-Profits.

“It is still astounding that we are happy to pay full wages to someone selling iPads, for example, yet for someone who is running an organisation providing crucial social and health assistance their pay can be so much lower,” he said.

According to research commissioned by Philanthropy New Zealand in 2011 and undertaken by BERL Economics, the Non Profit sector in New Zealand is a significant economic force. It represented a $NZ9.8 billion industry with operating expenditure of $NZ6.5 billion. It also mobilised volunteer work that represented an additional $NZ3.3 billion of labour. The total value added to GDP was $NZ7 billion, or 4.9% of GDP.

“For a sector that is so important to New Zealand and the way society functions, it faces complex issues. The disparity in pay of CEOs is indicative of the challenges most not-for-profits face along with quality of governance and management.

“With some of these organisations you also have well intentioned, strong minded people, who have such belief in a cause that they forget or ignore conventional governance or management rules. There are also the complexities around a lack of accountability, especially when dealing with volunteers, attracting and retaining staff when they are being paid less than other sectors, developing capability and capacity and educating the general public.

“There also is much more to do and changing times means that needs are increasing,” he said.
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