Senior pay: how much is too much?

Offer too little and you risk failing to attract the right candidates. Pay too much and you risk a backlash from donors and beneficiaries. Peter Stanford debates how to determine the right salary for your chief executive

It is among the hardest judgement calls a charity has to make: how much to pay its chief executive.

The public, for its part, has fixed ideas. In Third Sector’s Donating Trends survey in 2017, "excessive" executive remuneration was identified by respondents as the key factor in reducing trust in charities.

Fifty-six per cent of respondents suggested that anything more than £40,000 a year deserved that tag.

Trustee boards, and their advisers and HR consultants, meanwhile, have to reconcile that judgement with the imperative to recruit in what all are agreed is a market with more demand than supply. Third Sector’s 2017 pay study found that the top 100 highest-paying charities paid their biggest earners a mean average of £255,000 a year.

figures

Even when you strip out what are arguably the atypical bodies on the list – such as the philanthropic foundations, some charitable private hospitals and arts bodies – you still end up with the big, well-known fundraising charities paying an average of about £186,000 a year.

There is, therefore, a gulf, and one big enough to test even the most innovative bridge-builder. But, as ever, the statistics looking at only one part of the sector do not reflect the whole picture. A survey published last year by Acevo, the charity chief executives body, found that its members were paid an average salary of £50,000, and this figure was going down, not up.

We live, though, in an age where impression is all and facts are secondary, so the stereotype has taken root that every charity chief executive is living it up on six figures. However, analysis by Charity Financials has found that just 0.5 per cent of the staff in the 168,237 registered charities are paid more than £100,000.

And, according to the National Council for Voluntary Organisations, just 9 per cent of charities in England and Wales employ staff. Even among those that do, 26 per cent of their workers earn less than the living wage, according to the Living Wage Foundation.

So, for any charity seeking a new chief executive, there is a tough challenge: offer a low salary and risk receiving no applicants. Offer too much and risk a platoon of finger-waggers making themselves known.

There are few fixed points of guidance that might help. The obvious one is to find out what "equivalent" charities are paying, but unless it is more than £60,000 it doesn’t have to be declared in published accounts. And even if it is, there is a real risk of comparing apples with pears.

There is no norm or catch-all pay scale, according to Jenny Hills, senior consultant at the charity recruitment specialist Harris Hill. It all depends on your particular circumstances.

"Chief executives need to be skilled negotiators, managing relationships with stakeholders ranging from the life-long supporter to the actively hostile," she says.

"To dramatically understate things, it’s a big job. The smaller the charity, the more hands-on it has to be. As well as leading the charity, we know that many chief executives will, when needs be, literally stuff envelopes.

"Every charity chief executive role is different, but it’s safe to describe it as a job that most people could not do – and of those who could, many make use of their skills in the public or private sectors for considerably higher salaries."

And that is the next complicating factor. Once people would spend their whole lives working for charities. Nowadays, traffic between the not-for-profit sector and the rest is so routine that no one blinks, except when it comes to the pay.

Those heading towards the third sector – or boomeranging back – will often speak of wanting to put something back into society, achieving greater job satisfaction and seeking esteem and status on the basis of what they do rather than what they are paid.

But life is rarely that simple. One eminently well-qualified thirty-something management consultant with a wealth of experience from secondments at charities tells me that, after registering with a charity recruitment consultant, he was told about a handful of jobs that really excited him in terms of the cause and the commitment: "But then I have a mortgage to pay in London, and at this stage in my life I just cannot afford to take such a big pay cut."

As a trustee, sitting on the other side of the interview table, seeing potentially the best candidate slipping through your fingers, the temptation in such cases is to stretch the budget. But how do you sell that to your supporters, already at some fundamental level resistant to anything being spent on charity administration?

"I want every penny of my donation to go the people in need," is a demand regularly heard. The reply – that it requires expert staff to plan the logistics and make sure those most in need benefit from the money (or what it buys) – too often gets a dusty answer in an age when Michael Gove, a Cabinet minister no less, told us all not to listen to experts.

Such a backdrop makes some risk not explaining, but instead keeping as quiet as possible about pay rates. It’s understandable, but wrong, says the NCVO in its best-practice guidelines. Transparency, it says, is the best protection as long as you have a good reason.

It’s a hard lesson to learn. Two-thirds of big charities are still coming up short on this test. Which, of course, does the ultimate test of public trust a further disservice. And round we go for another angst-ridden lap.

Have you registered with us yet?

Register now to enjoy more articles and free email bulletins

Register
Already registered?
Sign in
Follow us on:

Latest Governance Jobs

RSS Feed

Third Sector Insight

Sponsored webcasts, surveys and expert reports from Third Sector partners

Markel

Expert Hub

Insurance advice from Markel

Charity property: could you be entitled to a huge VAT saving?

Charity property: could you be entitled to a huge VAT saving?

Partner Content: Presented By Third Sector promotion

When a property is being constructed, VAT is charged at the standard rate. But if you're a charity, health body, educational institution, housing association or finance house, the work may well fall into a category that justifies zero-rating - and you could make a massive saving