Striking a balance: Charitable CEO salaries under scrutiny

CEO pay is a hotly debated topic. Especially within the charity sector. Surely it is reasonable for those working in the charitable sector to expect salaries akin to those in similar positions while simultaneously wanting to change the world for the better?

How harmoniously can these two sentiments co-exist and is it time to reset public perceptions around how charities spend their money?

Cost-of-living crisis

When economic conditions are harsh, donations are often the first expense to be cut. Then salaries come under the spotlight.

Unite general secretary, Sharon Graham said, “Massive pay rises for charity bosses is quite rightly, a major source of tension. Corporatisation in the charity sector is growing and workers on the frontline are the ones feeling the brunt.”

As the growing crisis pushes many more people into poverty, the need for charity CEOs to do more with less is becoming even more important. Pressures increase and with it workload and expectations.

Charities must publicise the number of employees who have been paid more than £60,000 a year. The mean number of people earning more than £60,000 a year among the top 100 charities this year was 84, up from 68 in Third Sector’s 2019 Salary Study. However, the average salary for fundraisers has not kept pace with inflation, reaching £37,700 in 2022 – a 4% increase on the average salary in 2019 which was £36,300, according to a report from CharityJob for the Chartered Institute of Fundraising.

Looking beyond fundraising at all types of jobs posted on CharityJob – the average salary has seen a 3% decrease in the last three years. The average salary across 45,000 jobs in 2019 was £35,700. In 2022, the average salary for 61,900 jobs was £34,800.

“It’s simple, senior management and trustees need to ensure workers on the sharp end are paid fairly for the invaluable work that they do. They need to put a stop to corporatisation at the top if they want to maintain the trust of their donors,” warns Graham.

Pay at the peak

A Charity Commission spokesperson said, “As they face the same financial challenges individuals, households and organisations across the country face, charity trustees will need to account carefully for every penny they spend, especially those that rely on contributions from the public.

“We expect decisions made by trustees about pay to be made carefully, mindfully and in a way that ultimately serves the charity’s beneficiaries into the future with this in mind.”

Pay is a sensitive topic, especially when talking about those working in the third sector. The average salary for CEOs at the UK’s largest 100 charities increased by £5,000 since 2021, a new analysis has found. Meanwhile, wage inflation is making it even more difficult to recruit and retain staff in a sector already struggling to compete with private sector salaries.

To put things into perspective, the median FTSE 100 CEO was paid £2.69m in 2020, which is 86 times the median full-time worker in the UK.  FTSE 100 bosses are paid more in three days than the average UK worker for a whole year, according to the High Pay Centre, a think tank that campaigns for fairer pay for workers.

However, CEOs at these top 100 charities receive a median salary of £175,000, up from £170,000 in 2021 and £155,000 in 2019, according to the Charity’s Chief Executive Survey 2023. These are not huge figures, comparatively speaking, given that the average salary of a CEO is £200,883 per year, with an additional cash compensation of £107,6581. Although this amount may sound high, the highest earners typically manage the biggest charities.

Duro Oye, CEO and co-founder of 20/20 Levels believes that disproportionate salaries not only jeopardise the reputation of charitable organisations but also raise critical questions about priorities.

“Especially during challenging periods when charities are facing financial constraints, trustees must carefully deliberate whether exceptionally high salaries align with the core values of these organisations and the urgent needs of the communities they serve,” he adds.

Strikes and salaries

“The well-publicised strike action by workers at the homelessness charity St Mungo’s should serve as a cautionary tale for Executives. Workers helping the homeless took strike action because they couldn’t afford the basics,” warns Graham.

In order to attract CEOs with the knowledge and expertise necessary, charities must strike a balance in their pay practices.  They must do this without alienating those who donate or taking money away from their primary aim. In order to maintain the highest quality of service to the communities and causes that charities operate with, it is crucial to prioritize the CEO’s professional/personal development. But at what cost?

Rachel Middleton, consultant at Odgers Berndtson thinks that in the private sector, you can often equate a CEO’s value to commercial ROI, but in the charity sector it is far more nuanced.

“Their success is aligned to the mission of the organisation, the charity’s social impact, or the level of service provided to the people they support. Boards must be rigorous in how they approach assessing a CEO’s value, developing clear impact frameworks and goals to rationalise their leader’s remuneration package,” she says.

Dispel the myths

The perception that charity CEOs are overpaid, diverting money away from the causes charities were founded to support, is a result of a few publicized incidents of excessive salaries – Consumers’ Association and Age UK – amongst others, despite the fact that the majority earn modest incomes.

There are over 168,000 charities on the Charity Commission register. Of those, 82% have an income of below £100,000. 91% of charities are volunteer-run and of those charities which do have paid staff, the average CEO salary is £52,000 per year.

CEOs have tough jobs. Charity CEOs often have it even tougher, encompassing many facets. The leaders of charities frequently find themselves playing the role of outward-facing flag-bearers, whose duty it is to sell the story of the charity, in addition to the traditional obligations of a CEO, including line management, operational and fundraising control and strategy-building.

A Wellcome spokesperson said, “Wellcome spends over £1bn a year supporting science to solve urgent health challenges. Our work is funded by our endowment and we do not seek donations from the public.

“Remuneration, including that of the investment team who manage our £38bn endowment, is benchmarked annually to ensure it is in line with the market rate for each role.”

Fair pay

According to Middleton, there is also an important diversity and inclusion angle.

“The sector has faced challenges around the diversity within senior leadership positions. Attracting a diverse range of talent to the sector requires the CEO’s pay to fairly reflect market value and the broader economic environment,” she adds.

A talented CEO will enhance efficiency, widen the charity’s reach and increase profitability. a worthwhile investment. To dismantle assumptions that high salaries are equivalent to inefficient use of funding, charities need the support of regulators and funders.

The economic, health and political crises have put charities’ resilience to the test in recent years. Good CEOs support their charity through shocks. But great ones will go further and deliver breakaway impact.

According to Duro, during challenging times with financial strains on charities, trustees should prioritise responsible stewardship.

“Considering the appropriateness of very high salaries becomes crucial, as it ensures resources are directed towards the mission and beneficiaries, fostering transparency and sustaining public trust,” he adds.