6-2 Short Paper: Nonprofit Executive Compensation Tara Schirmer Week 6 Short Paper
What are some of the advantages for a not-for-profit organization that pays its executives similarly to a for-profit business? Explain using specific details. Some of the advantages, and I am not sure that they should be called that, are attracting the skilled talent that will fill those positions within the organization. It is that old saying now a days, you get what you pay for, and that statement holds true with Non for Profit. If you are willing to provide compensation, you are going to attract the talent that you are looking for. A major donor to the museum stated that an experienced individual is needed and that an attractive financial package would be a sure way to acquire such an individual. You want to make sure that you fill the position with an educated well verse person that has held that position before and has been successful doing so. You also want to make sure that the candidate that is hired understands and has the passion for position and that it is still a non-for-profit. Employee commitment is a huge positive as many of the people that work or volunteer for the organizations have a personal connection to that specific cause in some way. Another main advantage is that charitable non-for-profits are exempt from paying taxes on income and property. That is a big advantage for executives as far as their income. What are some of the disadvantages of expecting executives to work for less in a not-for-profit than they would in a comparable position in a for-profit corporation? Explain using specific details. One of the major disadvantages is that Non-For-Profits solely rely on donations from public and private donors. So, if the funds are limited or null, so is the executive pay and that can affect retention and recruitment. There is also a lot of social pressure and backlash for
executives of non for profits that receive substantial compensation. Many see nonprofits as more of volunteer work not to make a living or live above. The public also will look at the organization and wonder if that is where all the donations are going too. The press would have a field day with the organization for paying an executive that kind of compensation. As with everything else, there are always pros and cons to compensation and what is fair and to who is paying for it or receiving it. In this world it is a "You get what you pay for" type of culture and if you want success, skill, long term commitment and a strong executive team, you need to compensate for that specific skill.