But even without accounting for stock options, pay still soared last year. Average cash compensation among the top 50 CEOs was $945,000. That's a 23% raise over 2003 — not bad in a year when the average Oregonian's annual pay rose 3.4% (to $35,625) and the S&P 500 was up just under 10%.
— The editors

Compared to what private-sector CEOs take to the bank every year, it might appear that top executives at nonprofits get off on altruism alone. But dig a bit deeper, and it turns out there are wide discrepancies in nonprofit CEO pay. While some executives make no more than a mid-level manager in the private sector, others have negotiated pay in the $500,000 to $1 million range.

Cliff Dias, CEO of Portland Teachers Credit Union (PTCU), is the top-paid nonprofit executive in Oregon, based on our research. He pulled down an annual base salary of $1.58 million in 2003, and has gotten a half-million-dollar raise every year since 2001. (Pay rankings are based on Form 990 tax filings provided by the organizations or Guidestar.org, which compiles financial data on nonprofits; where possible, only base salary is used.)

Dias makes some local bank chiefs look like modest earners. Ray Davis of Umpqua Holdings, which has $5.0 billion in assets (more than double PTCU's), received $763,000 in total direct compensation ($447,000 of that in base salary) last year. Oregon's other top-paid bank CEOs also earned only about 60% of what Dias did.

These public company CEOs also earned less than Legacy Health System CEO Robert Pallari ($1.13 million in base salary, plus $1 million more in deferred compensation and benefits). In fact, eight nonprofit CEOs — Dias, Pallari, Tom Sargent of First Technology Credit Union, Michael Miller of Goodwill Industries, Cynthia Finter of Kaiser Foundation Health Plan, Russ Danielson of Providence Health System, Deryl Jones of Portland Adventist Medical Center and Ava Milosevich of SELCO Community Credit Union — would have made the top-paid public company CEO list this year.

Critics question whether executives who don't have to deliver profits to shareholders should earn for-profit-level salaries. "One of the tricky things in the nonprofit world is to work out how much someone should be paid," says Stacy Palmer, editor of The Chronicle of Philanthropy. "There's nothing in the law that states what's appropriate."

WHAT MAKES THE QUESTION more complicated is the variety of organizations. There are around 1.6 million nonprofits (excluding churches) registered with the Internal Revenue Service. "There are tens of thousands of nonprofits run solely by volunteers, then there are behemoths and everything in between," says Guidestar CEO Bob Ottenhoff.

At the top end among charitable institutions are typically the heads of health care organizations, such as Legacy, Providence and Kaiser, who routinely receive compensation topping half a million.

Paul Dorf, managing director of Compensation Resources in New Jersey, advocates raising the bar on nonprofit pay. "The world is so competitive," he says, "and you're looking for people who are not just doormats but have the acumen necessary to operate a business."

Under a 1996 law, the IRS can penalize organizations when it deems managers to be paid excessively. As a guide to what's fair, the agency suggests that organizations look to their for-profit colleagues. That, in effect, has led nonprofits to increase pay scales. The Chronicle found in a recent survey that nonprofit executives have received higher percentage raises for the past six years than their counterparts in the private sector.

WITH PUBLIC COMPANIES AS THE STANDARD, Tom Glatt, the COO of Portland Teachers Credit Union, believes his boss should earn more. In the seven years Dias has headed PTCU, it has become the largest credit union in the state with assets ballooning from $800 million to $2 billion — without an increase in workforce. "That's pretty remarkable," says Glatt. "If you think about his performance, he's practically underpaid."

Glatt points out that CEOs such as Dias receive virtually all their compensation in pay and there are no stock options. While retirement programs can be significant (SELCO's Milosevich got a $1.15 million payment in 2003), they often require long-term commitments from the CEO. "A credit union is not charitable-based," he adds. "Unlike a hospital or Goodwill, we don't get government subsidies, nor do we have people drop off merchandise."

Regardless of such assistance, some organizations still pay their CEOs unusually high compensation. Michael Miller, president of Goodwill Industries-Columbia Willamette chapter, makes $575,500 for overseeing $70 million in revenue and nearly 2,000 employees. That compares to $339,000 for the president of Goodwill in New York, which has comparable revenue and employees.

Local Goodwill board chairman Thomas Young, CEO of Regents Bank in Vancouver, explains: "We don't want to take the risk that he could be attracted elsewhere."

Young says that half of Miller's compensation is a bonus tied to specific achievement goals, adding: "We're used to thinking of for-profit companies operating according to performance, but those principles are just as appropriate for not-for-profits." Young insists that the Portland chapter is now the most successful in the country. "It doesn't ring true that there's a never-ending line of people willing to work for submarket wages," he says.

That's a common feeling in the field. Paul Nicholson oversees the Oregon Shakespeare Festival in Ashland, along with co-director Libby Appel. With three theaters running several productions concurrently, Nicholson says running the festival is beyond the abilities of most people. "An organization as complex as this has to offer a significant salary to attract leaders who have the exper-ience to run it," he says.

Part of that compensation is for fund-raising, says Chronicle editor Stacy Palmer: "In the tough economic times we've been having, nonprofits need people with better skills to bring in the money." There's also competition between organizations. To survive, says Dartmouth University business professor John Vogel, many have shifted to a fee-for-service model rather than relying on gifts and grants, much like businesses in the private sector.

IMITATION OF FOR-PROFIT PAY SCALES has sparked a philosophical debate. One study, conducted in 2001 by professors at Harvard and Northwestern universities, found that CEO pay is not most linked to performance, as measured by improved efficiency or fund-raising, but to free cash flows, especially in health care.

Others argue that the compensation-for-talent equation is a fraud. John Van Til, a professor of public policy at Rutgers University, believes nonprofits are a distinct organizational animal from for-profits, and they should act that way. "They're oriented toward the provision of helping services. Altruism is built into the core," he says. "It's important to compensate people adequately, but nonprofits need to represent themselves as a separate and different kind of place."

Dorf, the compensation expert, says that's an outdated philosophy. "That was the way people used to think. People shouldn't be paid less because they want to do good."

Yet even defenders of high compensation believe limits are necessary. "If the CEO is making two or three times more than the next-highest [executive], it's inappropriate," says Vogel. Examples are not hard to find. At Portland-area Goodwill Michael Miller earns nearly four times more than the director of finance, at $141,211. Board chairman Young explains the disparity as a consequence of Miller's value to Goodwill.

Van Til is convinced that big pay gaps between nonprofit executives and their rank-and-file workers sap morale and productivity. Nonetheless, PTCU and Kaiser have both ranked in the top five among the Oregon Business 100 Best Companies to Work For in recent years.

The pay issue, though, has attracted attention in Washington, D.C. A Senate committee, alerted to potential abuses in spending for Sept. 11 victims, is investigating nonprofit CEO pay. And the IRS is studying thousands of nonprofits to crack down on excesses.

Stacy Palmer of The Chronicle of Philanthropy expects those investigations to cast a chill over compensation. "There's so much talk about nonprofit managers being paid too much," she says. "People are going to be a lot more cautious in the future than they have been."

NONPROFIT CEOS: A SAMPLING
Name	Location	Organization	Compensation*
Cliff Dias	Portland	Portland Teachers Credit Union	$1,579,135
Robert Pallari	Portland	Legacy Health System	$1,133,642
Tom Sargent	Beaverton	First Technology	$738,265
Michael Miller	Portland	Goodwill Industries of the Columbia Willamette	$575,454
Cynthia Finter	Portland	Kaiser Foundation Health Plan of the NW	$523,079
Russ Danielson	Seattle	Providence Health System--Oregon	$506,960
Deryl Jones	Portland	Portland Adventist Medical Center	$387,402
James Depriest (retired)	Portland	Oregon Symphony Association	$370,000
SELCO Community Crediit Union	Eugene	Ava Milosevich	$367,500
Richard Stensen	Hillsboro	Tuality Healthcare Inc	$311,478
Bart McMullan	Portland	Regence BlueCross BlueShield of Oregon	$308,479
James Lussier	Bend	Cascade Healthcare Community	$293,483
John Buchanan	Portland	Portland Art Museum	$250,032
Victor Fresolone	Roseburg	Mercy Healthcare	$245,963
Gordon Hoeraus	Eugene	Oregon Community Credit Union	$232,007
Jonathan Ulsh	Portland	Oregon and Health Science Univ Foundation	$213,684
Paul Nicholson and Libby Appel	Ashland	Oregon Shakespeare Festival Association	$202,400
Maynard Orme	Portland	Oregon Public Broadcasting	$196,800
Carol Thomas	Portland	Northwest Regional Education Laboratory	$192,150
Allan Olson	Lake Oswego	Northwest Evaluation Association	$180,832
Neal Keny-Guyer	Portland	Mercy Corps	$175,000
Tony Hopson	Portland	Self Enhancement Inc	$169,833
Lawrence Norvell	Portland	United Way of Columbia-Willamette	$167,760
David Greenberg	Portland	Planned Parenthood Columbia-Willamette	$163,738
Christopher Mattaliano	Portland	Portland Opera Assoc	$144,000
Kim Scott	Portland	Trillium Family Services	$142,290
Spencer Beebe	Portland	Ecotrust	$139,125
Mark Young	Portland	YMCA of Columbia-Willamette	$137,985
Gregory Chaille	Portland	Oregon Community Foundation	$135,250
Gail Zimmerman	Portland	National Psoriasis Foundation	$132,248
Bennet Johnson	Portland	DePaul Industries	$129,165
Jay Bloom	Portland	Morrison Center	$126,608
Mary Monnat	Portland	Lifeworks NW	$126,100
Gerald McIntosh	Albany	Albany General hospital	$125,240
Nancy Stueber	Portland	Oregon Museum of Science and Industry	$122,496
John Murphy	Portland	Portland Habilitation Center	$120,000
Margaret Gardner	Portland	Northwest Energy Efficiency Alliance	$118,695
Mary Loftin	Portland	American Red Cross Oregon Trail Chapter	$115,000
Adella Macdonald	Portland	YWCA of Greater Portland	$114,167
Bas Vanderzalm	Portland	Northwest Medical Teams	$114,000
Richard Harris	Portland	Central City Concern	$113,850
Andrea Oncken	Portland	Dove Lewis Memorial veterinary hospital	$112,521
Sharon Harmon	Portland	Oregon Humane Society	$110,000
Chris Coleman	Portland	Portland Center Stage	$107,500
Gayle Byrne	Medford	Goodwill Industries of Southern Oregon	$106,410
Jim Martin	Eugene	Goodwill Industries of Lane County	$102,550
Rachel Bristol	Portland	Oregon Food Bank	$100,478
Jack McGowan	Hillsboro	SOLV	$99,878
Jerralynn Ness	Hillsboro	Community Action Association	$97,277
Norma Paulus (former)	Portland	Oregon Historical Society	$95,000
Forest Rodgers	Bend	High Desert Museum	$95,000
Robert Visdos	Portland	Worksystems Inc	$94,476
Samuel Thompson	Boise, Idaho	Boy Scouts of America Oregon-Idaho	$90,522
Robert Doolen	Medford	Asante	$81,986
Michael Maksimowicz	Portland	Portland Rescue Mission Ministries	$80,854
Marcia Director	Portland	Albertina Kerr Centers	$70,333
Kim Freed	Portland	Oregon Zoo Foundation	$69,424
Andrew Asato	Portland	Make a wish foundation of Oregon	$68,805
Wendy Radmacher-Willis	Portland	City Club of Portland	$68,200
Cynthis Guyer	Portland	Portland Schools Foundation	$66,157
Carrie Hoops	Portland	Literary Arts Inc	$58,397
Meg Young	Portland	Oregon Literacy	$37,500
Gene Bradley	Portland	KBOO Foundation	$0
Denyse McGriff	Portland	1000 friends of Oregon	$0
Rob Miller	Silverton	Oregon Garden Foundation	$0
*Base salary not including benefits and other compensation
Methodology: Base salary is based on tax form 990 provided by Guidestar.org or the organization. Compensation for the most recent year available is reported.

[SIDEBAR]
WHAT IS A NONPROFIT?
Quicken.com's financial glossary defines a nonprofit corporation as "a business entity formed for civil, social, or charitable purposes for which the generation of profit is not part of its function." Nonprofits, sometimes also called not-for-profits, are tax-exempt. Those established for charitable purposes (501(c)(3)) can accept tax-deductible donations; many others, including credit unions (501(c)(14)), business organizations (501(c)(6)) and the like, cannot.

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Copyright 2005 Oregon Business magazine