Outcome-Based CEO Pay in Building Nonprofit Capacity

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    Last week, I did a workshop among nonprofit CEO Executive Directors. Some of them expressed great frustration at the exorbitant compensation of CEOs of very large, in-building nonprofit capacity for-profit companies. They mentioned that many of the company’s products were very poor quality anyway.

    One participant offered a rather novel assertion that the pay of those CEOs should be based on how much customers actually benefited from the companies’ products and services. (She refined her assertion a bit by adding that compensation should also be based on the performance of the stock and on some performance goals set by the Board.)

    Another participant in the workshop ventured the question, “Then should a nonprofit Executive Director’s pay be based on how many of the outcomes were achieved by participants in the nonprofit’s programs?” (Remember that outcomes are the types of changes achieved by participants in programs, e.g., new knowledge, skills, and abilities.)

    That question produced a firestorm of indignation and assertions about building nonprofit capacity organizations is very different than for-profit. I asked for a vote to get a sense of how many people believed that the E.D.’s salary should be based, at least in part, on outcomes. Only 2 out of 15 agreed. Then I asked for a vote of how many believed that a for-profit CEO’s salary should be based on some measure of customer benefits — 9 out of 15 agreed that should be the case for for-profit CEOs.

    What do you think? Should a nonprofit E.D.’s salary be based somehow on outcomes from programs?


    For more resources, see our Library topic Nonprofit Capacity Building.