Nonprofit Radio: Equitable Compensation

I’ll be on on Nonprofit Radio this Friday, February 21, at 10:30 am PT / 1:30 pm ET talking with host Tony Martignetti about charity compensation and pay equity. You can listen live on Talking Alternative. The archived podcast will be available a few days after the show airs.

Corporate and tax attorneys who provide “nonprofit law” counsel to charitable organizations often cover compensation issues from the perspective of not violating any private benefit or excess benefit transaction laws. Excessive compensation can be a serious issue for some charities and private foundations, and Tony and I have discussed these issues before. However, often neglected are discussions of under-compensating employees and what risks may arise from policies and practices that perpetuate this problem. Here are some of the topics I hope we’ll get to cover:

  • Pay equity free of bias based on gender, race, or other characteristics (whether protected or not) other than skills and performance. 
  • Risk of percentage-based increases reinforcing past inequities in the compensation structure.
  • Determining a pay gap (between highest compensated and lowest compensated employees) that is consistent with the values of the organization.

Takeaways (updated 3/1/20)

  • There remains a very significant pay gap between men and women and among workers of different races.
  • There is an astronomical pay gap between the CEOs of the largest companies and the average worker (these CEOs make 278x the average worker).
  • California is considering legislation to impose a tax on big companies (net revenues of $10 million or more) with a CEO – average worker pay ratio of greater than 50.
  • Pay increases applied evenly across the organization may serve to perpetuate compensation inequities built into the system.
  • 401(k) employer matching contributions may be inequitable.
  • Compensation audits (including of benefits), compensation committees composed of a diverse group of employees, values-driven decision-making, and consideration of more flexible work arrangements may all be important parts of creating a more equitable compensation structure across the organization.

Additional Resources 

US nonprofits: What your organization can do to achieve pay equity (Mission Box)

Reimagining Compensation: It’s time to stop building on inequities of the past (Part 1) (CompassPoint)

Reimagining Compensation: It’s time to stop building on inequities of the past (Part 2) (CompassPoint)

The Nonprofit Industry Has A Big Wage Gap Problem (Fast Co.)

Pay Equity and Discrimination (Institute for Women’s Policy Research)

Conduct a Pay Equity Study to Mitigate Litigation Risks (SHRM)

California considers tax on companies with large pay gaps between CEOs and their workers (Fast Co.)